Zama cUSDC Freeze Locks Users After Overnight Finance Hack Link - Coinfea

Zama has said its cUSDC smart contract freeze on Ethereum was collateral damage from the Overnight Finance hack, not a fault tied to its protocol or privacy technology

ContentsCircle Freeze Hits Entire cUSDC ContractUninvolved Users Lose Access To FundsZAMA Token Falls After FreezeCircle froze the full confidential USDC contract after an address connected to the hack moved more than $12.5 million USDC into Zama’s cUSDC wrapper. The action locked about $12.6 million in user funds and triggered a sharp market reaction around the ZAMA token.

Circle Freeze Hits Entire cUSDC Contract

Zama co-founder Rand Hindi said Circle’s blacklist of the protocol’s contract address had no connection to misconduct by Zama. He explained that the issue began when an address linked to the Overnight Finance hack deposited a large amount of USDC into the cUSDC wrapper.

The deposit represented nearly all funds inside the wrapper because the product had limited usage at the time. Reports placed inaccessible user funds near $12.6 million on Ethereum.

Hindi credited on-chain investigator ZachXBT for helping identify the source of the problem. He also said the freeze had nothing to do with privacy and came from funds tied to the Overnight Finance case.

The USDT and USDC Ban List Telegram tracker showed the Zama contract was frozen at 01:08 UTC on Friday. Etherscan labels the affected address, 0xe978…72B2, as Zama cUSDC Token.

Uninvolved Users Lose Access To Funds

Circle’s compliance process flagged the linked depositor’s wallet, but the funds were already inside the cUSDC smart contract. As a result, the freeze applied to the full contract address instead of only the flagged depositor.

That decision affected regular users who had deposited USDC into the wrapper and were not connected to the hack. Their funds remain inaccessible while Zama seeks a narrower resolution through legal and compliance channels.

Hindi stressed that Zama’s product is not a mixer. He said the protocol does not hide senders or recipients and only protects balances and transaction amounts.

He also pointed to the depositor’s transaction record on Blockscout to show that activity can still be traced. That point aimed to separate Zama’s privacy tools from systems designed to conceal illicit fund movement.

ZAMA Token Falls After Freeze

The freeze quickly hit market sentiment. ZAMA fell 18.2% intraday, dropping from about $0.039 to $0.032 in roughly five and a half hours.

The token later recovered to around $0.035, but it remained below its level before the freeze. Trading volume rose 61% over 24 hours to $73.9 million, close to the token’s $77.5 million market value.

Zama paused its cUSDC, cUSDT, and cWETH contracts as an immediate precaution. Hindi said the team will publish a post-mortem and a framework for handling future freeze requests. The outcome now depends on Circle and related court action.