Seizure of Frozen Crypto Wallets on Circle
Circle is a global financial technology company that issues USD Coin (USDC). USDC is a regulated stablecoin. Circle helps businesses manage digital currencies for payments, commerce, and other financial applications by serving as a financial platform built on cryptocurrency and public blockchains.
As a centralized issuer of USDC, Circle has the authority to “blacklist” addresses and freeze funds at the request of state or federal law enforcement officers in the United States. The freezing operation is recorded on the blockchain, making it a transparent. One biggest drawback of owning USDC occurs because of how readily they freeze access at the request of law enforcement.
For example, for forfeitures by the Internal Revenue Service Criminal Investigation (IRS-CI), they might freeze a cryptocurrency wallet on Circle containing USD Coin (USDC). Many of those IRS-CI criminal investigations are focused on investigating financial crimes like tax fraud and money laundering. Innocent owners who purchased the USDC for for value might see their entire account or wallet frozen based on a small amount of tainted funds.
The account holder needs an attorney focused on federal civil asset forfeiture proceedings focused on forfeitures and cryptocurrency regulations. The attorneys at Sammis Law Firm are focused administrative and judicial civil asset forfeiture actions, especially those involving high value cryptocurrency accounts on platforms like Circle.
Federal law enforcement agencies can request that a platform like Circle freeze a wallet containing USD Coin (USDC) as part of a criminal investigation. While the account is frozen, the law enforcement agency might serve a subpoena on Circle to obtain information on the account and the account holder.
Based on that information, the law enforcement officer might seek a seizure warrant from a judge. When the seizure warrant is served on Circle, they will send the contents of the wallet to a U.S. government controlled wallet.
If the cryptocurrency seized is valued at less than $500,000, the federal agency can begin an administrative forfeiture by publishing a notice of seizure on the forfeiture.gov website. The owner of the wallet must then find that notice of seizure and respond appropriately by filing a verified claim for court action before the deadline announced in the notice.
If the cryptocurrency seized is valued at $500,000 or more, the federal agency must initial court action by convincing an Assistant United States Attorney (AUSA) to file a complaint for forfeiture in the appropriate U.S. District Court.
In those cases, the account holder must find the notice of seizure published by the United States Attorney’s Office (USAO) on the forfeiture.gov website.
Attorney for Seizures of Frozen USDC on Circle
If the funds in your Circle wallet were frozen because of actions taken by a law enforcement agency in the United States, contact an experienced civil asset forfeiture attorney.
Your attorney can investigate transactions in your wallet to learn more about what triggered the investigation.
While the wallet is frozen, Circle might give you contact information for the lead agent on the case with a request that you reach out to them. At that point, it might be best to retain an attorney in the United States who is experienced with criminal and civil asset forfeiture proceeding.
The experienced asset forfeiture attorneys at Sammis Law Firm are experienced in dealing with IRS investigations into cryptocurrency. We work with some of the top experts in tax law and regulations. We can help you determine the legal basis for the Circle account being frozen, and help you respond appropriately before the funds are seized.
By being proactive, your civil asset forfeiture attorney can help you gather the relevant financial records which might include transaction history, tax filings, and information about the source of the funds to show the assets were obtained and used legally.
Use our evaluation form on the right side of the website to request a consultation with an attorney at Sammis Law Firm, or call us at 813-250-0500.
Recent Court Actions Involving Frozen Assets on Circle
In May of 2025, Circle froze approximately $57,000,000.00 million in USDC after obtaining a court order related to a lawsuit involving the LIBRA memecoin scam. The action triggered a significant drop in the token’s value and investor losses. Many investors who unwittingly purchased USDC for fair market value were caught up in this action unfairly.
In early October 2025, Circle was unable to freeze USDC funds stolen in a hack on the Coinbase exchange, as a results of hackers moving the funds across different blockchains. Circle might also block transfers from addresses associated with illegal activity or violations of its user agreement. For example, in 2022, Circle froze more than 75,000 USDC held by users with ties to the cryptocurrency mixer Tornado Cash in response to sanctions issued by the U.S. Treasury Department for facilitating money laundering.
New Laws on Seizing Stable Coins
On July 18, 2025, President Trump signed the Genius Act which required all stablecoin issuers must possess the technical capability to seize, freeze, or burn payment stablecoins when legally required and must comply with lawful orders to do so.
The term (16) LAWFUL ORDER.—The term ‘‘lawful order’’ means any final and valid writ, process, order, rule, decree, command, or other requirement issued or promulgated under Federal law, issued by a court of competent jurisdiction or by an authorized Federal agency pursuant to its statutory authority, that—
- (A) requires a person to seize, freeze, burn, or prevent the transfer of payment stablecoins issued by the person;
- (B) specifies the payment stablecoins or accounts subject to blocking with reasonable particularity; and
- (C) is subject to judicial or administrative review or appeal as provided by law.
How Circle Freezes Accounts Pending Seizure
How does Circle freeze or block associated USDC from a specific wallet address? For Circle-custodied funds, the freeze is a function in the USDC smart contract. The Circle’s compliance team has the authority to “blocklist” or freeze addresses based on special functions explained in the USDC smart contract.
Circle holds the private key used to interact with the smart contract and execute these freeze functions. Circle reserves the right to block addresses and freeze associated USDC if it determines the addresses are linked to illegal activities or violation of their terms of service. The USDC terms of use provide:
Blocked Addresses & Forfeited Funds
Circle reserves the right to “block” certain USDC addresses and, if such addresses are Circle custodied addresses, freeze associated USDC (temporarily or permanently) that it determines, in its sole discretion, may be associated with illegal activity or activity that otherwise violates these Terms (“Blocked Addresses”).
In the event that you send USDC to a Blocked Address, or receive USDC from a Blocked Address, Circle may freeze such USDC and take steps to terminate your USDC Account.
In certain circumstances, Circle may deem it necessary to report such suspected illegal activity to applicable law enforcement agencies and you may forfeit any rights associated with your USDC, including the ability to redeem USDC for USD.
Circle may also be required to freeze USDC and/or surrender associated USD held in Segregated Accounts in the event it receives a legal order from a valid government authority requiring it to do so.
The Trouble with USDC and Overly Broad Seizure Warrants
On March 23, 2026, it appears that a private law firm obtained a court order that required Circle to freeze the USDC stablecoin balances of 16 business wallets at once. The same thing is happening with USDT at Tether.
At least for the USDC cases, the frozen addresses have no apparent connection that would suggest they were engaged in money laundering and include a wide range of operational infrastructure: crypto exchanges, online casinos, forex brokers, and payment processors. For example, the action froze the ckETH Minter smart contract, a bridge operated by the DFINITY Foundation that connects the Internet Computer Protocol (ICP) to Ethereum. That pattern suggests that 16 wallets were maintained by “innocent owners” completely unaware that any portion of their funds were allegedly tainted.
Circle has told those impacted that the freeze was triggered by a sealed U.S. civil case in Southern District of New York, identified by Case Number 26-cv-2327 (26-cv-002327). It is unclear whether the actions to freeze USDT by Tether fall under that same case number.
While the details of the underlying litigation remains sealed, it appears a private law firm likely secured a court order to freeze assets as part of a fraud recovery effort. Circle has told several owners of the frozen cryptocurrency to contact “walletinquiries@wilkie.com” (Willkie Farr & Gallagher LLP) for more information regarding the action taken in 26-cv-2327. The same thing has happened when USDT is frozen by Tether.
When any of these innocent owners email walletinquiries@wilkie.com, it appears they are getting a return email that says:
Thank you for your email.
The assets contained in this wallet have been identified in a U.S. federal court order and are the subject of ongoing litigation.
To ensure that no legitimately obtained funds are frozen and ultimately distributed to the Plaintiffs in the litigation, we would appreciate your answers to following questions by email to walletinguiries@willkie.com:
- What is your full legal name or the legal name of the entity that owns the wallet?
- What is your home address or the business address of the entity that owns the wallet?
- If the wallet is owned by a business or entity other than an individual, what is the full legal name of the individual or individuals who own the business or entity and what is their home address?
- Please provide the wallet address that is the subject of your inquiry.
- When did you open the account?
- What specific crypto assets are contained in that account, both type and amount?
- What were the last five transactions conducted using that account?
- What were the sources of the funds that are in the account?
- Please provide a copy of the passport or other government-issued identification for the owner or owners of the wallet.
Please note, we represent only the plaintiffs in this matter. We are not your lawyers and cannot provide you with any advice.
In criminal seizures led by the Department of Justice, Assistant United States Attorneys (AUSA) are experienced, selective and accountable. In civil seizures initiated by law firms, those same restrains do not yet exist. Attorneys in private law firms can seek an order from the court to freeze or seize asses through an ex parte motion. The owners of the frozen accounts have no notice or ability to defend themselves at that ex parte stage of the case. Instead, the private law firm can effectively shut down numerous unrelated businesses or “innocent owners” by convincing a judge that a “dragnet” freeze is necessary to prevent the dissipation of funds. Not only are the “tainted” funds frozen, but all funds in that wallet are frozen which might cause the innocent owner to suffer damages.
By freezing these nodes, Circle and Tether have disrupted the financial lives of thousands of innocent third-party users who were simply transacting through these platforms. The backlash appears to have forced a partial retreat. By early April, Circle began quietly unfreezing some of the assets. For example, DFINITY’s ckETH Minter was restored, preventing a total collapse of the ICP-Ethereum bridge. It has been reported online that the wallet of Goated.com, which held approximately $131,000, was unfrozen after its operational status was clarified.
As of April 7, 2026, additional reversals are expected, yet Circle has remained largely silent, offering no public rebuttal or detailed explanation for the mass blacklist. This incident serves as a stark reminder of the problems with using a regulated stablecoins. While USDC offers the security of U.S. dollar reserves, it also carries a risk that the funds might be frozen or seized. The innocent owner then has to join a lawsuit to show their innocent owner status to get the funds back.
When a centralized issuer like Circle receives a court order, they often feel they have no choice but to comply—even if the order is technologically illiterate or overly broad. This creates a dangerous precedent where a private law firm in a civil matter can weaponize the legal system. The value of USDC is only as stable as the most aggressive lawyer in New York.
Attorney Leslie Sammis has also seen similar actions taken by Tether about a week later when Tether froze millions in USDT across various Tron wallets. Owners were told to contact “walletinquiries@wilkie.com” (Willkie Farr & Gallagher LLP) but were not given a case number or the jurisdiction in which any litigation was pending so it is unknown how these cases are related to the action taken in 26-cv-2327 (although it appears to be closely related).
Read more about the seizure of frozen USDT for forfeiture.
This article was last updated on Tuesday, April 21, 2026.
