Home » Crypto News Share: Share: The bad press facing stablecoin issuer Circle, following the $280 million exploit on the Solana trading protocol Drift, has gone up a notch after a California-based legal group filed a class action lawsuit against it, alleging it stood by while North Korea-linked hackers moved millions in stolen USDC through the firm’s own bridge, making it liable for investor losses from the attack. However, an analyst just made a case that Circle’s hands-off approach wasn’t negligence but rather the only way it could preserve the foundational principles that make USDC viable for institutional use. ” According to him, there are several reasons why Circle’s inaction was the more sound path, with the first being that the incident was a “market/oracle exploit” and not a straightforward theft.
” Valente also warned of contagion effects, where, if stablecoin issuers freeze funds based on their own judgment, then that permission structure would spread across the entire stack and would see bridges reversing transfers, DEXs blacklisting routers, wallets blocking transactions, and oracles tweaking price feeds at will. “The whole point of permissionless onchain finance is that none of these actors get to play judge,” he wrote. Thirdly, the analyst explained that due process functions as a product feature rather than a limitation.
“The reason institutions build on USDC is because Circle can’t wake up and zero out your balance,” he said, suggesting that a stablecoin that can fold to social media pressure can then be easily swayed into action by any sufficiently loud voice. There is also the legal risk that the analyst feels nobody seems to want to discuss. Hackers move money fast.
Within minutes, innocent liquidity providers and market makers end up holding tokens that passed through a mixer or a bridge. And if they freeze too aggressively, platforms like Circle may end up doing what could constitute theft from people who had nothing to do with the original crime. In this way, they risk facing lawsuits from downstream counterparties.
- Circle CEO Blames ‘Moral Quandary’ for Not Acting on $280M Drift Exploit - US Treasury Extends Bank-Grade Threat Intel to Crypto Sector - Aethir Dodges Major Crisis After Containing Bridge Hack: Losses Stay Under $90K Finally, Valente decried the lack of consistency, calling out popular on-chain investigator ZachXBT, who he said had gone after Circle on multiple occasions for freezing wallets without explanation, including more than 16 business-linked addresses just days before the Drift incident. Now, the same critic wants Circle to freeze faster. “You can’t have it both ways,” wrote the ARK researcher.
” One claim is that Circle aided and abetted hackers simply by letting them use the Cross-Chain Transfer Protocol. Another is that Circle had an affirmative duty to recognize the harm and freeze assets. Robinson doubts the suit succeeds, but noted that if it did, the risk could extend to anyone operating a bridge.
While Circle defends its choices in court and on social media, Drift Protocol is not waiting around. The project announced a collaboration with Tether totaling nearly $150 million. The plan centers on a relaunch where USDT replaces USDC for settlements.
A $100 million revenue-linked credit facility, ecosystem grants, and loans to market makers will fund a recovery pool for affected users. However, Circle’s Allaire had already laid out the company’s position during an April 13 press conference in Seoul. It only acts when the law requires it, he said.
The company does not get to step away from legal obligations to make judgment calls, even when the moral calculus feels obvious.
