Circle Sued for ₱13.81 billion ($230 million) Over Drift Protocol Hack Inaction
Circle faces a class action lawsuit from over 100 Drift Protocol investors who claim the stablecoin issuer let ₱13.81 billion ($230 million) in stolen USDC transfer from Solana to Ethereum without intervention. The lawsuit accuses Circle of negligence and aiding the conversion of funds suspected stolen by North Korean state-backed hackers.
Key Takeaway
Circle's freeze-or-not decision without court orders now sets a precedent every stablecoin issuer will face.
Circle faces a class action lawsuit from over 100 Drift Protocol investors who accuse the stablecoin issuer of allowing hackers to move ₱13.81 billion ($230 million) in stolen USDC without freezing the funds.
Joshua McCollum filed the lawsuit Wednesday in US district court in Massachusetts on behalf of investors who lost money in the April 1 exploit. The total hack drained ₱16.81 billion ($280 million) from Drift Protocol. McCollum's attorneys said Circle permitted the criminal use of its technology and services. The attackers made over 100 transactions through Circle's Cross-Chain Transfer Protocol during US working hours, moving USDC from Solana to Ethereum over several hours.
The lawsuit alleges negligence and aiding and abetting conversion. McCollum's attorneys argued these losses would not have occurred, or would have been substantially reduced, had Circle taken timely action. After reaching Ethereum, the funds were converted to Ether and laundered through Tornado Cash to obscure the trail. Crypto analytics firm Elliptic suspected North Korean state-backed hackers executed the attack.
ARK Invest Director of Research for Digital Assets Lorenzo Valente defended Circle's decision not to freeze funds without a legal order. He argued every future freeze is now a judgment call, and every non-freeze is a political statement. Why freeze the Drift hacker but not that sketchy Nigerian fraud wallet, Valente asked Thursday. He added whether Circle got it right comes down to how much you weigh rule-of-law principles versus concrete harm.
The lawsuit notes Circle had frozen 16 USDC wallets about one week before the Drift incident in connection with a sealed US civil case. That precedent strengthens the investors' claim that Circle had the technical capability and legal awareness to act. Valente speculated the stolen funds will likely fund North Korea's nuclear weapons program, with the class represented by law firm Mira Gibb.
This article was written based on reporting from Cointelegraph.
