Circle scandal: ZachXBT exposes $420 Million in suspicious USDC transactions

$420 million vanished: What does the ZachXBT report reveal?

The news sent shockwaves through the crypto market. This Friday, April 3, 2026, ZachXBT published a detailed thread on X, exposing 15 major cases where Circle allegedly failed its compliance obligations. In total, over $420 million stemming from hacks reportedly flowed freely through USDC without the company intervening in time to freeze the funds.

The most striking example remains the recent Drift Protocol hack on Solana. While attackers siphoned nearly $285 million, including $232 million in USDC, Circle allegedly took over six hours to react. This delay provided the perfect window of opportunity for hackers to launder the funds via Circle’s official Bridge (CCTP) to Ethereum.

For experts, this sluggishness is incomprehensible. While USDC positions itself as the most regulated stablecoin on the market, this inactivity paradoxically turns it into a tool of choice for cybercriminals. Market makers and Liquidity providers are now growing concerned about the glaring flaws in the company’s on-chain surveillance and the consequences of this revelation.

Tether (USDT) vs Circle (USDC): A striking contrast in dealing with hackers

ZachXBT’s investigation also highlights a blatant difference in approach between Circle and its main competitor, Tether. During the massive Bybit hack in February 2025 by the North Korean Lazarus Group, Tether froze the associated addresses within hours. Circle, on the other hand, reportedly waited an additional 24 hours, giving criminals ample time to organize the withdrawal of their loot:

“On February 28, 106,000 USDT and 338,000 USDC were transferred to the fraudulent address 0xDa2. Law enforcement, Bybit, and private sector experts submitted freeze requests to Tether and Circle. Tether froze the address within hours. Circle took an additional 24 hours to react,” he stated.

This delayed response policy can be found in other high-profile cases, such as the Cetus DEX hack ($200 million) or the GMX exploit. Circle often justifies its inaction by the need to wait for formal court orders. However, in an ecosystem where transactions are executed in seconds, this administrative red tape fuels a sense of concern among institutional investors.

In light of these revelations, the market fears a decline in the trust placed in centralized stablecoins. If Circle fails to prove the effectiveness of its compliance engine, which was supposed to be operational since 2024, users could turn to more responsive or fully decentralized alternatives to secure their portfolios.

Can USDC survive this crisis of confidence and maintain its peg?

These allegations come at the worst possible time for Circle, which is looking to consolidate its position as an institutional leader ahead of the next bull run. The revelation of these flaws could trigger a severe drop in its market share against USDT. Decentralized protocols, which rely heavily on USDC for their liquidity pools, might reconsider their counterparty risk management.

The issue of centralization is therefore back at the center of the debate. On one hand, regulators demand immediate freezes to counter money laundering. On the other, Circle’s slow execution proves that the current model is ill-suited for blockchain emergencies. If no internal reform is announced quickly, this case could mark a decisive turning point in the stablecoin wars.

As the crypto market digests this news, one question is on every trader’s lips: will institutions continue to accumulate USDC, or will we witness a massive migration toward other safe haven assets?

For now, the stock market is closed, and Circle (CRCL) shares have not yet faced the market’s reaction. Currently sitting at $90, the price has not reacted to ZachXBT’s statement, even on Hyperliquid, where the market is tradable 24/7.

Sources:

• X – ZachXBT
• Bitcoinist

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