TLDR
- A federal class action lawsuit has been filed against Circle Internet Group in Massachusetts court.
- The complaint alleges Circle refused to freeze approximately $230M in USDC moved after the Drift Protocol breach on April 1.
- The attack drained around $280M from Drift Protocol, marking it as one of 2026’s most significant DeFi breaches.
- Hackers utilized Circle’s Cross-Chain Transfer Protocol to shuttle stolen assets from Solana to Ethereum across multiple hours.
- Blockchain intelligence provider Elliptic believes North Korean government-linked hackers orchestrated the breach.
Circle Internet Group finds itself embroiled in legal turmoil. A federal class action complaint lodged Wednesday in Massachusetts alleges the stablecoin provider failed to intervene while hackers transferred approximately $230 million in USDC following one of this year’s most devastating cryptocurrency thefts.
The breach targeted Drift Protocol on April 1, siphoning roughly $280 million from the decentralized finance ecosystem. The lawsuit contends that Circle observed the stolen funds migrate across multiple blockchain networks over several hours without taking action.
Joshua McCollum, a Drift Protocol investor serving as lead plaintiff, initiated the legal action representing over 100 affected parties. The filing accuses Circle of negligent conduct and assisting in the illegal transfer of the pilfered assets.
Attackers leveraged Circle’s proprietary Cross-Chain Transfer Protocol to shift the stolen USDC from the Solana blockchain to Ethereum. The legal complaint maintains Circle possessed both the technological means and contractual authority to immobilize those digital wallets — yet declined to do so.
“Circle permitted this criminal use of its technology and services,” McCollum’s legal representatives stated. “These losses would not have occurred, or would have been substantially reduced, had Circle taken timely action.”
Mira Gibb, the law firm handling the case, represents McCollum and fellow investors. Financial compensation will be established during trial proceedings.
The plaintiffs highlighted a noteworthy comparison: approximately one week prior to the Drift incident, Circle froze 16 USDC wallets tied to a confidential US civil proceeding. This action, they contend, demonstrates Circle maintained both the capability and willingness to intervene — raising questions about their inaction in this instance.
Circle’s Defense and ARK’s Take
Circle has remained silent regarding the litigation. Cointelegraph’s request for comment went unanswered at publication time.
ARK Invest’s digital assets research director, Lorenzo Valente, offered a counterargument defending Circle’s stance. He contended that freezing assets without judicial authorization creates a troubling precedent — effectively granting private corporations unchecked authority over wallet freezes.
“Every future freeze is now a judgment call. Every non-freeze is a political statement,” Valente explained. He conceded, however, that the pilfered assets would probably finance North Korea’s weapons development.
“Whether Circle got it right comes down to how much you weigh rule-of-law principles vs concrete harm,” he said.
What Happened to the Funds
Following the cross-chain transfer, attackers converted the stolen USDC into Ether before channeling it through Tornado Cash, the mixing service, to erase transaction traces.
Blockchain intelligence company Elliptic attributes the exploit to North Korean government-sponsored cybercriminals. Elliptic observed the perpetrators executed over 100 transactions using Circle’s bridging infrastructure during standard US operating hours.
The Drift Protocol breach eliminated a substantial portion of the platform’s locked assets and triggered shockwaves throughout numerous DeFi protocols.
CRCL stock moved 1.84% following the news.
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