‘Crypto’s Sherlock’ Says Circle Is Undoing USDC Wallet Freeze Tied To Sealed New York Case

• Five of the 16 frozen wallets have been reportedly unfrozen by Circle, according to blockchain investigator ZachXBT. 
• The freeze is also reportedly tied to a sealed New York civil case 26-cv-2327, with no public details available.
• The affected wallets reportedly belonged to multiple unrelated businesses. 

Circle Internet Group (CRCL), the issuer of the USDC stablecoin, reportedly unfroze two business-linked hot wallets on Saturday, blockchain investigator ZachXBT reported, amid growing scrutiny over last week's freeze tied to a sealed New York civil case. 

ZachXBT, often known as “crypto’s own Sherlock,” reported that five of the 16 wallets originally frozen had been restored, after Circle unfroze the latest addresses just hours earlier.

The latest unfreezes reportedly followed Circle’s decision to freeze USDC balances across 16 operational business hot wallets, citing compliance with an ongoing U.S. legal matter. ZachXBT, who first reported the freeze on Tuesday last week, said he had spoken with one of the affected firms, which confirmed the action was linked to case number 26-cv-2327, a sealed civil case in New York with no details publicly available. 

“In my five-plus years of investigations, it could potentially be the single most incompetent freeze I have seen,” he said on Wednesday. 

The freeze allegedly disrupted user activity across multiple platforms, preventing withdrawals from centralized exchanges to the affected wallets. ZackXBT said that Aaron Nathan of law firm Willkie Farr had been identified as counsel for the plaintiff in the case.  

Circle's stock was down over 1% in after-hours trading. On Stocktwits, the retail sentiment around Circle remained in the ‘bullish’ territory as chatter levels around it remained ‘high’ over the past day. 

As per CoinDesk’s reports, ZachXBT has been  referred to as ‘crypto’s own Sherlock’ by scam victims. 

Circle’s History Of Freezing USDC

The incident has added to a growing list of enforcement actions involving centralized stablecoins. In 2020, Circle froze roughly $100,000 in USDC funds in response to a law enforcement request. In 2022, Circle blacklisted addresses associated with Tornado Cash following U.S. Treasury sanctions. More recently, in May of last year, Circle froze about $57 million in USDC linked to a civil case involving the LIBRA memecoin scam.

USDC was trading at $0.99 over the past 24 hours. On Stocktwits, retail sentiment around USDC shifted from ‘neutral’ to ‘bearish’ as chatter levels remained ‘low’ over the past day.

Stocktwits has reached out to Circle for comment but has not received a response at the time of publication.

Read also: Ripple CEO Admits He Was Too Early On Clarity Act, Says Stablecoins Are Crypto’s ‘ChatGPT Moment’

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