Circle’s refusal to ‘burn and reissue’ stolen USDC angers prosecutors, report

Prosecutors in Wisconsin and New York are growing frustrated with stablecoin giant Circle after it repeatedly ignored law enforcement requests and court orders trying to recover stolen funds.

The International Consortium of Investigative Journalists (ICIJ) detailed how the firm is facing criminal complaints and referrals to Congress over its inability to take action when asked to help recover funds. 

Milwaukee County Police Detective Scott Simons told the ICIJ that he’s seen over a dozen cases where Circle has either refused law enforcement requests to freeze victim funds, or where court orders weren’t obtained quickly enough to stop the flow of crypto. 

The report details how the loss of $400,000 by one pig-butchering victim in Wisconsin led to state prosecutors filing a criminal complaint against Circle in April.

Prosecutors claimed that the firm did intentionally “disobey, resist, or obstruct the authority, process, or order of the court” regarding a warrant asking it to “burn and reissue” the victims’ stolen funds.

Circle had already complied with a court order asking it to freeze the victim’s funds. However, authorities wanted it to seize the funds, “invalidate” them, and then issue $381,000 in new USDC. 

Circle attempted to dismiss the complaint last week, calling it “meritless.” 

The firm claimed that it didn’t have the “technical ability to comply” with the warrant, nor did the Circuit Court issuing the warrant possess the relevant jurisdiction to make the request. 

However, crypto tracing firm Cryptoforensic Investigators told the ICIJ that all Circle has to do is update its code.

The ICIJ also notes that in the court filing footnotes, Circle had essentially okayed the permanent freezing of tokens and the reissuance of new USDC to victims. This, in turn, achieves the “burn and reissue” process it said it couldn’t do in the first place.  

Read more: Circle rarely freezes stolen funds but wants reversible transactions

In another instance, New York prosecutors wrote a letter to Congress highlighting Circle’s inability to tackle stolen crypto funds. 

They claim, “Circle has refused to cooperate with law enforcement or freeze assets unless compelled to do so by legal process, refused to comply with validly issued state search warrants, and refused to return stolen funds to victims, even when compelled by court order.”

The letter said that for Circle, “it is financially preferable to only freeze cryptocurrency deemed to have been stolen, but not return the underlying asset to law enforcement or any fraud victim, because Circle can continue to collect the interest through investment of the underlying funds.”

The ICIJ highlights blockchain researcher Yury Serov and his claim that 119 million USDC tokens remain frozen.

Crypto investigators are also agitated by Circle.

In January, independent blockchain sleuth “Tanuki42” claimed that Circle sat idly by as it waited for a court order to freeze $3 million worth of “publicly verifiable” stolen funds. Fellow crypto sleuth ZachXBT also chimed in to call Circle a “bad actor.”

Circle was also criticized for its slow response in 2025 after DeFi platform GMX was hacked for $42 million. Tens of millions of USDC were swapped into the DAI stablecoin, which cannot be frozen. 

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