Wisconsin prosecutors filed a criminal complaint against Circle, the company behind USDC, after the stablecoin issuer refused a court order to burn and reissue stolen tokens. The case stems from a romance scam in Walworth County where a victim lost approximately 381,000 USDC to a fake investment platform. Circle froze the wallet as ordered but declined to invalidate the tokens and issue replacements to law enforcement, citing technical limitations. The dispute highlights a broader debate over why Circle appears less willing than competitors like Tether to help recover stolen cryptocurrency. Critics argue the policy leaves scam victims waiting while their funds remain inaccessible, though Circle maintains it only acts on valid legal orders to protect users from wrongful freezes.
Wisconsin Romance Scam Triggers Court Dispute
A Walworth County resident identified as "Victim #1" was convinced to purchase USDC and send about 381,000 tokens to what investigators later determined was a fake investment platform. After tracing the funds, a judge ordered Circle to freeze the wallet, which the company did without delay. Months later, the court ordered Circle to invalidate the frozen tokens and issue the same amount of fresh USDC to the Walworth County Sheriff's Office. Circle refused the second order, stating it does not have the technical ability to burn and reissue USDC held inside another party's wallet. Prosecutors responded with a criminal complaint, an unusual move against a company of Circle's size. Circle later asked the court to dismiss the case, arguing the Wisconsin court lacked jurisdiction and that prosecutors ignored alternative compensation proposals the company had offered. Walworth County prosecutor Thomas Binger said the dispute shows how quickly scammers can move funds compared with the pace of the legal system.
Circle Cites Technical Limits on Token Burning
Circle's technical explanation has drawn criticism from blockchain researchers. Joshua Cooper-Duckett of Cryptoforensic Investigators told ICIJ the company could update its smart contracts to support burning and reissuing tokens held in third-party wallets. Circle did not answer when asked whether it could make those changes. Court filings revealed Circle had discussed a victim compensation process with federal prosecutors that involved permanently freezing stolen tokens before issuing replacement USDC. The company did not explain whether that arrangement applies outside federal cases.
New York Prosecutors Allege Reserve Interest Conflict
Earlier this year, New York prosecutors told U.S. senators that Circle generally requires court orders before freezing USDC and has not consistently returned stolen funds after courts approved their release. The prosecutors made an additional allegation: Circle continues earning interest on reserve assets backing frozen USDC, giving the company little financial incentive to return those funds quickly. Circle has not accepted that claim. Blockchain researcher Yury Serov estimates that at least 119 million USDC is currently frozen. Those tokens cannot move, but they remain backed by reserve assets unless another process removes them permanently.
Tether Freezes 30 Times More Value Than Circle
AMLBot data shows Tether froze about $3.3 billion in USDT across more than 7,200 wallets between 2023 and 2025. Circle froze about $109 million in USDC over the same period, a 30 times gap by value. Part of that difference comes from Tether's burn and reissue process. After freezing stolen USDT, the company can destroy those tokens and issue clean replacements to law enforcement or victims. Tether says it has already reissued around $1.1 billion and frozen $4.7 billion linked to illicit activity. Circle does not currently offer the same public process for third-party wallets, although its court filings show it has discussed similar arrangements with federal authorities. Tether has said it sometimes acts before courts become involved if law enforcement requests help. Circle says it only responds through formal legal process, arguing that the approach protects users from wrongful or politically motivated freezes.
Law Enforcement Reports Delayed Recovery Efforts
Investigators argue that since stablecoin transfers settle within seconds, valuable time is often lost before legal paperwork is complete. Milwaukee County detective Scott Simons told ICIJ he has worked on more than a dozen cases where Circle either declined an early freeze request or where the court order came too late. For many victims, he said, the answer is simply that the money is gone.
FAQ
What did Circle refuse to do in the Wisconsin case?
Circle refused a court order to invalidate approximately 381,000 frozen USDC tokens and issue replacement tokens to the Walworth County Sheriff's Office. The company stated it does not have the technical ability to burn and reissue USDC held inside another party's wallet.
How much USDC has Circle frozen compared to Tether's USDT freezes?
Between 2023 and 2025, Circle froze about $109 million in USDC while Tether froze about $3.3 billion in USDT across more than 7,200 wallets. Blockchain researcher Yury Serov estimates at least 119 million USDC is currently frozen.
Why do New York prosecutors say Circle may lack incentive to return frozen funds?
New York prosecutors alleged that Circle continues earning interest on reserve assets backing frozen USDC, which they argue gives the company little financial incentive to return those funds quickly. Circle has not accepted that claim.
