Wisconsin prosecutors have filed a criminal complaint against Circle, alleging the USDC issuer intentionally disobeyed a court warrant to recover roughly 381,000 stolen tokens for a local scam victim.

The misdemeanor charge sharpens a dispute over how much responsibility stablecoin issuers bear for returning stolen funds.

A Romance Scam Set the Criminal Complaint Against Circle in Motion

A Walworth County resident received an unsolicited text in May 2025 from a scammer calling herself Lenora. Posing as a romantic partner, she steered part of his savings into USD Coin (USDC), a dollar-pegged stablecoin, on a bogus investment platform.

According to the court filing, a county court ordered Circle to freeze the tokens last August, and it complied. In December, however, a judge ordered Circle to invalidate the tokens and reissue an equal amount to the sheriff’s office.

Circle reportedly refused, and prosecutors charged the $17 billion firm with a misdemeanor count of obstruction of justice, per the complaint. The company calls it meritless in a motion to dismiss, citing technical limits and a lack of jurisdiction.

“The tools that are at our disposal are not keeping up with the tools the criminals are using,” the report says, citing Walworth County prosecutor Thomas Binger.

Milwaukee County detective Scott Simons says Circle declined freeze requests or orders arrived too late in over a dozen cases.

The FBI logged a record $11.4 billion in crypto fraud losses for 2025. More than 18,500 victims lost over $100,000 each, even as detection lags AI-driven scams.

Why Tether Returns Stolen Funds While Circle Says It Cannot

Tether, whose USDT is the largest stablecoin, honors some law enforcement requests without a court order. The firm says it has frozen about $4.7 billion linked to crime.

Its software can also destroy or burn tokens in criminal wallets and issue replacements. Tether reportedly told ICIJ that the mechanism has returned $1.1 billion to victims.

Meanwhile, Tether’s T3 unit with TRON has frozen over $450 million. US prosecutors also seized illicit USDT funds worth $61 million in one case.

The gap reflects design and policy, not blockchain physics. Circle, which was listed on the New York Stock Exchange in June 2025, freezes tokens only under lawful process.

The policy is meant to prevent arbitrary or politically motivated interference. That caution has helped USDC gain ground in Europe under the EU’s Markets in Crypto-Assets (MiCA) rules.

In contrast, offshore Tether has embraced discretionary cooperation to rebuild its compliance reputation.

However, Joshua Cooper-Duckett of Cryptoforensic Investigators says Circle could update its token code to permit such burns. Circle policy chief Dante Disparte concedes the tools exist, writing in April that legal frameworks for faster action do not.

New York prosecutors see an incentive problem, too. A January letter to US Senators argued that Circle continues to earn interest on reserves backing frozen tokens. Blockchain researcher Yury Serov estimates that at least 119 million USDC have been frozen.

Circle counters that it recently reached an agreement with federal prosecutors on a victim compensation mechanism. The process would permanently freeze tainted tokens and reissue new ones.

Whether that mechanism ever reaches Walworth County may result in multiple misdemeanor charges. The case could define how far courts can go in requiring stablecoin issuers to make scam victims whole.

Circle did not immediately respond to BeInCrypto’s request for comment.

Source: BeInCrypto