Circle Froze 16 Exchange Wallets Without Clear Basis

Onchain investigator ZachXBT said Circle froze 16 wallets belonging to crypto exchanges, online casinos, and forex businesses without proper due diligence. An analyst with basic tools could have identified within minutes that these were operational business wallets from the thousands of transactions they process. He told one affected company directly that the freeze stemmed from an ongoing U.S. civil case with undisclosed details. His onchain analysis showed no apparent connections between the exchanges and forex businesses involved.

ZachXBT called it potentially the single most incompetent freeze he's seen in over five years of investigations. He said Circle had zero basis to freeze the dollar-pegged tokens and blamed the company for outsourcing freezing decisions to federal judges instead of having a transparent process.

Helius founder Mert Mumtaz used the incident as a reminder that centrally issued stablecoins are not actually yours — they can be frozen, unlike cash. USDC holds administrative controls in its smart contract that let Circle's compliance team freeze specific addresses linked to illegal activities or terms of service violations. Circle executes these freezes via private keys it holds.

Circle previously froze over 75,000 USDC tied to Tornado Cash users following U.S. Treasury sanctions in 2022. The company could not freeze USDC stolen in a Coinbase hack in early October 2025 because hackers moved funds across blockchains. Tether coordinated with Circle to freeze specific Wallex exchange wallets in Iran totaling ₱149.7 million ($2.49 million), targeting non-compliant addresses rather than the entire operation.

Circle typically freezes USDC at law enforcement requests, such as IRS Criminal Investigation probes into tax fraud and money laundering, where even innocent owners may face wallet freezes due to small tainted fund amounts linked to ₱149.7 million ($2.49 million) in coordinated freezes.