Circle sued in Wisconsin for refusing to help scam victims

In a striking legal move, prosecutors in the US state of Wisconsin have filed a criminal complaint against Circle, the company behind the stablecoin USDC. The accusation: Circle refuses to cooperate with a court order to recover stolen funds from scam victims. It concerns a misdemeanour, a relatively minor charge, but it is highly unusual for a state prosecutor to bring a criminal case against a large financial firm such as Circle. That is according to Karen Greenway, a former FBI agent and expert in financial crime.

What is happening exactly?

Both authorities in Wisconsin and in New York accuse Circle of failing to assist in freezing or recovering USDC that has been taken from scam victims. This is according to an investigation by the International Consortium of Investigative Journalists (ICIJ). The Wisconsin case revolves around a court order instructing Circle to help restore stolen assets. According to the prosecutors, the company is not complying.

What makes this case particularly notable is that it is not a civil proceeding but a criminal charge. Such steps against large financial institutions in the crypto sector are rare and therefore attract significant attention within the industry. USDC is currently one of the largest stablecoins on the market and Circle is a central player in the global crypto ecosystem.

Circle rejects the complaint

In a recently filed document, Circle states that it considers the Wisconsin complaint unfounded and requests that it be dismissed. The company says it simply lacks the technical capabilities to comply with the order. In addition, Circle argues that prosecutors never seriously considered the alternatives the company proposed to compensate the victim.

Furthermore, Circle challenges the authority of the Wisconsin court to issue such an order. According to the company, that court simply has no jurisdiction over this matter. The outcome of this case could have far-reaching implications for how stablecoin issuers handle law enforcement requests concerning scams and fraud cases in the future. It remains to be seen how the judge will rule on the arguments from both sides.