Stablecoin issuer Circle froze $12.6 million in USDC dollar-pegged tokens linked to privacy protocol Zama\u2019s confidential USDC smart contract on Saturday, according to onchain sleuth ZachXBT.<\/p>\n
The smart contract is \u201cpublicly labeled\u201d on block explorers and the privacy protocol\u2019s technical documentation, ZachXBT said<\/span><\/a>.\u00a0<\/p>\n The exact reason for the freeze is \u201cunclear,\u201d he said, adding<\/span><\/a> that wallets linked to the Overnight Finance decentralized finance (DeFi) protocol deposited $12.4 million into the Zama protocol on May 11, 2026. He said:<\/p>\n \u201cOvernight Finance held a governance vote recently to distribute treasury funds after holders alleged the team was rug-pulling. Regardless, it’s precedent-setting to unilaterally freeze the contracts or addresses of a protocol where funds have been commingled with Zama users.\u201d<\/p><\/blockquote>\n Source: <\/em>ZachXBT<\/em><\/a><\/p>\n \u201cFrom my understanding, the Zama team does not appear to have been notified of the Circle freeze prior,\u201d he said. Cointelegraph reached out to Circle but did not receive a response by the time of publication.\u00a0<\/p>\n The company has come under fire for failing to freeze funds<\/span><\/a> following major hacks of crypto platforms, and freezing wallets of legitimate crypto projects and protocols without giving those projects prior notice.\u00a0<\/p>\n Related: <\/strong><\/em>Tether freezes over $500M of USDT in 30 days, BlockSec data shows<\/strong><\/em><\/span><\/a><\/p>\n In March, ZachXBT accused Circle of \u201cwrongfully\u201d freezing 16 stablecoin wallets<\/span><\/a> linked to online casinos and legitimate crypto exchanges.<\/p>\n The wallets were frozen in connection with ongoing civil court cases in the United States; however, the businesses and wallets \u201cdo not appear related at all,\u201d he said<\/span><\/a>.<\/p>\n He later added that Circle failed to freeze about $420 million <\/span><\/a>in 15 separate cases involving fraudulent transactions or funds stolen through crypto hacks since 2022.<\/p>\n A list of 15 incidents since 2022, in which Circle failed to freeze funds, according to ZachXBT. Source: <\/em>ZachXBT<\/em><\/a><\/p>\n These incidents included the failure to freeze $232 million<\/span><\/a> in stolen user funds from the April 2026 Drift Protocol hack, despite having a six-hour window to act, he said.<\/p>\n Following the incident, users filed a class action lawsuit<\/span><\/a> against Circle for failing to freeze the funds, which flowed through Circle\u2019s Cross-Chain Transfer Protocol (CCTP), a bridge that allows assets to move between different blockchain networks.<\/p>\nCircle comes under fire for freezing legitimate user funds, but not stolen crypto <\/h2>\n
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