Circle Internet Financial is facing new law enforcement pressure after an ICIJ investigation said officials in Wisconsin and New York accused the USDC issuer of failing to help recover money stolen from scam victims.
The case centers on a criminal complaint filed in Walworth County, Wisconsin. Prosecutors allege Circle did not comply with a court order tied to stolen USDC, even after the company froze the funds. Circle denies wrongdoing and has asked for the complaint to be dismissed.
According to ICIJ, the Wisconsin dispute began after a local resident lost funds in an alleged romance and investment scam. The victim was pushed to convert savings into USDC and send the tokens to a fake investment platform. Authorities later traced the stolen assets to a private crypto wallet.
A Walworth County court ordered Circle to freeze about 381,000 USDC in August. Circle complied with that freeze. Later, a judge signed a warrant directing Circle to help seize the same funds. Prosecutors say the company refused to carry out that order.
Walworth County officials had already described two local investment fraud cases in an April release. The sheriff’s office said suspects converted most stolen funds into USDC and moved them across wallets to hide the trail. In one case, investigators identified a direct transfer of 381,235 USDC that stayed in the target wallet.
The county said it sought court-ordered seizure warrants after tracing the funds. It also said Circle declined to repatriate fiat reserves linked to the frozen tokens, citing a lack of legal precedent for reversing USDC transactions.
Circle says complaint should be dismissed
Circle has rejected the Wisconsin complaint. According to ICIJ, the company called the case meritless in a recent court filing. It argued that it did not have the technical ability to invalidate frozen USDC and issue replacement tokens as requested.
Circle also argued that Wisconsin prosecutors did not properly engage with alternative ways to compensate the victim. The company further claimed the Wisconsin court lacked jurisdiction to issue the order.
The dispute is not only about whether Circle could freeze the tokens. It also concerns whether a stablecoin issuer can be ordered to return value to victims after funds have already been frozen. That question sits at the center of the complaint.
Circle’s public policy position has focused on legal process. In an April blog post, the company said it freezes USDC when required by law, not when it makes its own decision to take assets from users.
“The tools that are at our disposal are not keeping up with the tools the criminals are using,” Wisconsin prosecutor Thomas Binger told ICIJ.
New York prosecutors raised similar concerns
The Wisconsin complaint comes after prosecutors in New York sent a letter to U.S. senators in January. The letter accused Circle of denying some law enforcement requests to freeze USDC without a court order. Prosecutors said that delay can matter because stablecoin transfers can move in seconds.
Law enforcement officials often depend on stablecoin issuers to freeze stolen funds before scammers move them again. However, Circle has said it should act only through lawful process from an appropriate authority. That stance differs from Tether, which told ICIJ it has frozen assets linked to illicit activity without always requiring a court order.
New York prosecutors also accused Circle of failing to honor court orders seeking the return of stolen funds to victims. They argued that frozen tokens can still create financial benefits because issuers hold reserve assets behind those tokens.
Circle’s USDC terms say the company may freeze USDC or surrender related U.S. dollar reserves when it receives a legal order from a valid government authority.
Stablecoin growth keeps the case in focus
The complaint arrives as stablecoins play a larger role in crypto payments and trading. Circle says USDC had 73 billion tokens in circulation as of July 6, 2026. The company also says USDC is backed by highly liquid cash and cash-equivalent assets.
USDC remains one of the main stablecoins in a market still led by USDT and USDC. As previously reported by The Coin Headlines, Circle CEO Jeremy Allaire defended USDC’s network strength after Open USD entered the stablecoin race with backing from large payment and technology firms.
Separately, stablecoins accounted for about 15 percent of the crypto market’s value, while USDC held a reported market cap of 73.2 billion dollars. These figures place disputes around frozen stablecoins before a broader audience of courts, regulators, and victims.
What happens next in the Circle USDC dispute
The Wisconsin case remains an accusation. Walworth County’s own release said a charge is only an accusation and that a defendant is presumed innocent unless proven guilty. Circle continues to deny that it broke the law.
For scam victims, the case shows the gap between freezing tokens and returning value. A freeze can stop movement, but it may not bring money back unless courts, issuers, and law enforcement agree on a recovery process.
The ICIJ investigation said Circle recently referenced a general agreement with federal prosecutors on a possible method to compensate victims when certain USDC funds remain permanently frozen. Circle did not say whether that method applies to the Wisconsin case.
