Chaos! Circle, the issuer of $USDC , publicly defies the law and is criminally indicted: it refused to upgrade the contract and seize stolen funds—what’s really behind it is chilling when you think it through

Let’s talk about something that really flips people’s worldview.

$USDC ’s issuer, Circle, has been criminally charged in the U.S. state of Wisconsin. Not a fine—criminal allegations.

It started with an investment fraud case. The court issued an asset seizure order, requiring Circle to assist in seizing about $381k worth of $USDC, and then destroy and re-mint tokens to return them to the victims.

Circle’s response was only three words: can’t be done.

But the truth is, it absolutely can be done—it just doesn’t want to.

First, let’s look at the background.

$USDT ’s issuer, Tether, has long cooperated with law enforcement. It can destroy $USDT from any address without notifying users, and it can also issue an equal amount of new coins at wallets指定ed by law enforcement.

This operation is called “destroy-and-reissue,” and there’s no controversy in the industry.

What about Circle? Currently, the $USDC smart contract indeed does not have any built-in functionality for seizure, transfer, or clawback. Circle can only blacklist and freeze addresses; it can’t invalidate the tokens or transfer them.

But note this: Circle can completely upgrade the $USDC smart contract and add this feature itself.

This is not a technical problem—it’s just a single line of code.

What the court wants is “assistance with seizure,” with no restriction on the method.

But what Circle told the police is: 1. The wallet is not hosted on Circle’s platform; 2. Circle does not have the private key for that address; 3. Therefore, Circle can’t transfer out the $USDC in the wallet; 4. Law enforcement must go find the private key itself.

Have the police go find the private key? That’s deliberate obstruction.

Market analysis suggests Circle’s calculation is this: refuse to cooperate and face the lawsuit at most; when it really can’t hold out, upgrade the contract again and then add the feature. It’s a logic of maximizing profit—freezing the involved funds for the long term, tying up that money to earn interest.

That money is a $381k reserve.

As long as an address is frozen, the corresponding fiat reserve sits on Circle’s books, and it can earn interest. If it destroys and reissues, the reserve must be released to the victims, and the interest is gone.

Circle claims publicly that “destroy-and-reissue requires double reserves,” which is pure deception. Because once the contract destroy feature is enabled, the old tokens are automatically invalidated and the original reserves are automatically released—no extra money needs to be set aside.

Circle also argued that “the contract forbids destroy-and-reissue $USDC.” But this contract is written by Circle itself, and it can be modified at any time.

Even more outrageous: Circle’s user agreement explicitly states that “if it receives a lawful judicial document, Circle is obligated to freeze $USDC or transfer the corresponding dollar reserve,” and the clause title even includes the words “forfeiture” directly.

The agreement is about Circle’s obligations, but in reality it claims it has no capability.

Starting in August 2025, the court issued seizure orders and repeatedly supplemented the documents. Circle fought for several months, and in April 2026 the government officially brought criminal charges.

Paragraph 9 of the indictment clearly accuses Circle of refusing to invalidate the stolen $USDC and refusing to issue new tokens.

Circle tried to shift blame to technology, saying it “does not have the private key of the address involved.” But this is a logical sleight of hand—Circle may not have the fraudster’s user private key, but it does have the contract upgrade key. Holding the contract upgrade authority is effectively holding another set of control rights, which means it can invalidate tokens, reissue them, and transfer them.

As long as you want to cooperate, there are ways.

The International Consortium of Investigative Journalists (ICIJ) followed up on this, but ultimately its reporting was too accommodating toward Circle.

Let’s summarize Circle’s list of lies:

• Saying it can’t invalidate $USDC → upgrading the contract is enough.

• Saying it can’t reissue $USDC → upgrading the contract is enough.

• Saying it can’t transfer $USDC to a third party → upgrading the contract is enough.

• Saying new $USDC issuance requires holding an additional reserve of $381k → as long as you destroy the old coins, it’s not needed.

• Saying the contract forbids destroy-and-reissue → this is an internal policy that can be modified unilaterally.

Every single point is false.

Unless Circle has already lost the ability to upgrade the contract—if that’s true, that would be a major hidden incident, but there’s no corresponding record in the case file.

So here’s the human question: why would a U.S. listed company dare to lie extensively during a legal standoff?

One view is that Circle treats any judicial instruction that would reduce interest income as “unreasonable”—being responsible to shareholders matters more than respecting the court.

In the U.S. adversarial judicial system, companies are allowed to object to government demands, but they are not allowed to refuse to comply directly after a judge issues a final, conclusive order.

Circle has already moved beyond the objection stage and moved straight into a defiance mode.

In the future, there are likely two outcomes:

First, Circle will eventually compromise—upgrade the contract and comply with the seizure.

Second, Circle will shift the blame to miscommunication between the legal and technical teams—so the judge won’t buy it.

What warning does this whole matter give to retail investors?

The $USDC and $USDT you hold are not fully decentralized, bearer assets that don’t depend on anyone. The issuer always controls the underlying permissions.

Tether can destroy your $USDT at any time, and Circle can upgrade the contract to freeze your $USDC at any time.

So-called “code is law,” when it comes to interests, is just a piece of paper that can be torn up at any time.

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