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Circle, the company behind the USDC stablecoin, is facing a criminal complaint filed by Wisconsin prosecutors. The core issue: Circle won’t burn and reissue frozen tokens, even when a court tells it to.
The case started in Walworth County. A victim — identified in court documents only as “Victim #1” — got pulled into a romance scam and was deceived into buying and transferring roughly 381,000 USDC to a fraudulent investment platform. Investigators traced the funds. A judge ordered Circle to freeze the wallet. Circle did that part. Months later, the court went further — it ordered Circle to invalidate the frozen tokens and issue the equivalent amount directly to the Walworth County Sheriff’s Office. Circle said no. The company’s position: it doesn’t have the technical capability to burn and reissue USDC sitting in a third-party wallet. That refusal is what pushed prosecutors to take the unusual step of filing a criminal complaint against the firm.
Not a minor escalation.
Circle Pushes Back, Cites Jurisdiction
Circle has asked the court to dismiss the case entirely, arguing Wisconsin doesn’t have jurisdiction over the company. Circle also said prosecutors brushed aside alternative compensation methods it had put forward to help the victim. Walworth County prosecutor Thomas Binger didn’t hide his frustration — he’s pointed out that scammers routinely outrun the legal system’s ability to freeze assets, and Circle’s insistence on formal procedures makes that gap worse.
The jurisdiction argument is pretty standard corporate legal defense. Whether it holds is another matter.
Milwaukee County detective Scott Simons has laid out what that actually looks like on the ground. In several cases, he said, either Circle declined an early freeze request outright, or the court order came too late — and the money was gone. Stablecoin transactions settle fast. The legal system doesn’t. That mismatch, Simons made clear, has already cost victims real money with no path to recovery.
Tether vs. Circle: A Growing Gap
The complaint has also dragged a familiar comparison back into the spotlight. Tether, Circle’s biggest rival in the stablecoin market, reportedly froze $3.3 billion in illicit funds between 2023 and 2025. Tether has a process that allows it to burn and reissue tokens, and it’s known to act on law enforcement requests without always waiting for a court order. Circle, over the same period, froze $109 million — and doesn’t publicly offer anything like that burn-and-reissue process for third-party wallets.
That’s a pretty significant difference, and it’s not going unnoticed.
Critics — including investigators on these cases — say Circle could modify its smart contracts to support that kind of function. Circle hasn’t responded to those suggestions directly. Blockchain researcher Yury Serov has put the current scale in perspective: he’s estimated that around 119 million USDC is currently frozen. That’s a lot of money sitting in limbo while legal and technical arguments drag on.
And it’s not just Wisconsin making noise. Prosecutors in New York have separately criticized Circle for requiring court orders before freezing USDC in the first place, and then not consistently returning funds even after legal approval comes through. The New York criticism goes further — prosecutors there have accused Circle of earning interest on the reserve assets backing frozen USDC. The suggestion is that Circle has a financial incentive to keep funds frozen longer than necessary. Circle hasn’t accepted that framing.
The Compensation Framework Question
There’s one more wrinkle. Documents show Circle has previously discussed a victim compensation framework with federal authorities. The setup apparently involves permanently freezing stolen tokens before issuing replacements to victims. But whether that process applies outside federal cases is unclear. No one has confirmed it does. That uncertainty leaves a lot of questions about what Circle’s actual policy is — and whether victims in state-level cases can access anything similar.
The stablecoin industry has grown fast, and the legal infrastructure around it hasn’t kept up. Law enforcement agencies across multiple states are now grappling with how to recover stolen digital assets when issuers won’t or can’t move as quickly as the technology allows. Circle’s case is probably the sharpest version of that tension right now — a company insisting on formal legal process while prosecutors watch funds become unrecoverable in real time.
Circle’s broader compliance posture has been a selling point with institutional clients. It’s positioned itself as the regulated, transparent alternative in the stablecoin space. But the Wisconsin complaint — and the New York criticism — suggest that reputation is getting tested. Whether Circle adjusts its technical capabilities or its legal stance, something has to give.
Serov’s estimate of 119 million USDC currently frozen isn’t going down anytime soon.
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Frequently Asked Questions
What did Wisconsin prosecutors accuse Circle of doing?
Wisconsin prosecutors filed a criminal complaint after Circle refused a court order to burn and reissue approximately 381,000 USDC stolen from a romance scam victim, citing a lack of technical capability to do so from a third-party wallet.
How much has Circle frozen compared to Tether between 2023 and 2025?
Circle froze $109 million in illicit funds between 2023 and 2025, compared to Tether’s $3.3 billion over the same period, according to figures cited in the complaint.
