The crypto world was rocked on April Fool’s Day by what has been dubbed the largest decentralized finance (DeFi) hack in history. Drift Protocol, a prominent platform, saw a staggering $280 million in assets vanish. Now, the fallout from this massive breach has directly implicated Circle, the issuer behind the widely used stablecoin USDC, as aggrieved investors launch a class-action lawsuit. They accuse Circle of “standing idly by” during the critical hours following the attack, thereby missing a crucial window to intercept the stolen funds.
On Tuesday, the law firm Gibbs Mura filed a lawsuit on behalf of the affected investors. The core allegation is that Circle failed to promptly freeze the compromised USDC assets after the hack. In a statement released Wednesday, the plaintiffs’ legal team asserted:
Despite Circle possessing both the technical capability and contractual authorization to freeze these funds, they took no action.
On-Chain Detective ZachXBT Questions Circle’s Inaction
Recounting the audacious cyberattack, the Drift team disclosed that the perpetrators not only gained illicit access to the platform and injected malicious assets but also manipulated withdrawal limits, enabling them to swiftly drain the liquidity pool. A chilling post-mortem investigation by Drift revealed that the hacker group had meticulously posed as a legitimate quantitative trading firm, embedding themselves within the platform for an astonishing six months. This sophisticated modus operandi has drawn significant scrutiny from across the market.
Prominent on-chain investigator ZachXBT has also sharply criticized Circle’s response. He highlighted: “In the $280 million Drift hack, Circle had a full 6-hour window – ample time to intervene and freeze these stolen funds.”
ZachXBT further elaborated that the incident unfolded during standard US business hours. Yet, Circle reportedly remained passive, allowing the hackers to leverage its own cross-chain transfer protocol to move approximately $230 million in USDC from the Solana blockchain to Ethereum over several hours. This led him to pose critical questions:
Why does the cryptocurrency industry tolerate such ‘failure to act’ scenarios?
If even a project boasting hundreds of millions in Total Value Locked (TVL) cannot secure support during a major incident, what incentive do crypto businesses have to remain within the Circle ecosystem?
The lawsuit further underscores a compelling point: just nine days prior to the Drift attack, Circle had proactively frozen 16 wallet addresses in an entirely unrelated civil case. The plaintiffs argue that this precedent unequivocally demonstrates Circle’s “not only having the ability to freeze funds but also the willingness to execute,” yet in the Drift incident, a passive stance was adopted.
Circle CEO Jeremy Allaire Defends Company Stance
In response to the mounting pressure and legal challenges, Circle CEO Jeremy Allaire addressed the issue in a press conference earlier this week. He firmly reiterated that Circle’s policy dictates freezing USDC wallets exclusively under the explicit direction of law enforcement agencies or court orders.
Allaire emphasized the potential “moral dilemma” and “dangerous proposition” that would arise if Circle were to bypass established legal procedures and unilaterally intervene in private disputes. He stated:
If the expectation is that Circle should disregard legal regulations and make its own decisions, I believe that is a very dangerous proposition.
Meanwhile, Drift announced on Thursday a significant step towards recovery, securing a $127.5 million recovery package from Tether and an additional $20 million from other strategic partners, bringing the total to approximately $147.5 million.
The Drift team confirmed that these restructuring funds are earmarked to help affected users reclaim their assets and facilitate the platform’s relaunch, with the ambition of becoming Solana’s largest USDT-based perpetual futures DEX.
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