ZachXBT’s Circle Files: USDC’s Biggest Compliance Scandal

Circle, the issuer of USDC, is facing criticism after blockchain investigator ZachXBT shared a detailed thread called “Welcome to Circle Files.” Over the past three years, Circle’s handling of USDC has reportedly resulted in losses totaling over $420 million, involving multiple high-profile hacks and thefts.

ZachXBT questioned why Circle didn’t use its power to freeze stolen USDC sooner.

Case by Case — USDC Compliance Failures

This is not a small accusation from a random account. ZachXBT is one of the most respected on-chain investigators in the world, and every claim in the thread is backed by verifiable blockchain data.

• The Drift Protocol Hack — April 1, 2026

One of the most recent cases is the April 2026 Drift Protocol exploit, over $232M USDC was bridged from Solana to Ethereum across more than 100 transactions in six hours. All using Circle’s own Cross-Chain Transfer Protocol, with no action from Circle.

Security researcher Specter noted that the attacker deliberately avoided converting to Tether during the bridging process, suggesting the hacker was confident Circle would not freeze the funds.

• The Bybit Hack — February 2025

When the Lazarus Group stole $1.5 billion from Bybit, law enforcement asked both Tether and Circle to freeze a theft address. Tether froze within hours, while Circle reportedly acted 24 hours later.

• Radiant Capital Hack – Oct 2024

In October 2024, Radiant Capital was hacked for $58 million by the Lazarus Group. The attacker stole USDC using open approvals and moved across multiple blockchains. The funds stayed in hacker wallets for hours, but Circle did not freeze them.

• Mango Markets Hack – Oct 2022

Similarly, in October 2022, Mango Markets was hacked for $110 million. The attacker moved $57.5 million to a Circle deposit address on Solana and later transferred the funds to Ethereum. The attacker was eventually charged by the SEC, but the stolen funds were never frozen on-chain.

• The Nomad Bridge Hack — August 2022

Around $45 million in USDC sat in hacker wallets for 30–45 minutes, and the hack was publicly known. Circle never blacklisted the addresses, and the funds were swapped out.

Why Circle Has Been Delaying in Taking Strong Action 

ZachXBT said Circle has the tools to act faster, but delays have affected users, with losses reaching nine figures. He noted that Circle is not helpless in this situation

USDC’s token contract includes a freeze and blacklist function, and Circle’s own terms of service explicitly state it reserves the right to restrict access for suspected illicit actors “in its sole discretion.”

This means Circle can freeze stolen USDC without waiting for court orders. But the problem, according to ZachXBT, is that Circle repeatedly chose not to act quickly.