Circle Internet Group, the issuer of USDC stablecoin, is currently under legal scrutiny following a class action lawsuit filed in an Massachusetts-based district court. The complaint centers on Circle’s alleged failure to prevent a significant theft via the Drift Protocol, where attackers exploited the system and stole approximately USD 280 million.

Joshua McCollum, representing over 100 stakeholders as a plaintiff, claims that Circle allowed about USD 230 million of USDC to be moved from Solana to Ethereum using its Cross-Chain Transfer Protocol (CCTP) without any intervention. This occurred over several hours.

According to the lawsuit, Circle is accused of aiding and abetting conversion as well as negligence. McCollum’s legal team suggests that timely freezing measures could have significantly mitigated or prevented these losses altogether. The exact amount of compensation will be determined during the trial process, with representation provided by Mira Gibb Law Firm.

Technical Capabilities and Ethical Obligations

The legal filing also refers to Circle’s previous actions. In a separate case, the company reportedly froze 16 USDC wallets within about a week before the Drift incident, indicating that it does possess the technical means for such intervention.

Analysis by Elliptic identified possible involvement of North Korean state-affiliated hackers in this exploit. The firm noted over 100 transactions occurring through Circle’s bridging services during business hours. Subsequently, the stolen funds were converted into Ether and transferred via Tornado Cash.

This case raises broader questions about the responsibility of stablecoin issuers to act in cases where they have technical freeze capabilities. Lorenzo Valente from ARK Invest’s Digital Assets Research highlighted concerns that unfettered discretion by issuers could set a dangerous precedent, questioning the consistency and rule of law in such situations.