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A new class action lawsuit filed in a U.S. district court in Massachusetts has put Circle under legal scrutiny over its response to the movement of stolen USDC following the Drift Protocol hack.
According to court filings, Drift investor Joshua McCollum is bringing the case on behalf of more than 100 affected users. The lawsuit alleges that Circle failed to stop roughly $230 million in USDC transfers carried out after the April 1 exploit.
The filing says the funds were routed across chains using Circle’s Cross-Chain Transfer Protocol over several hours, which the claimants argue gave attackers time to reposition assets without disruption.
“Circle permitted this criminal use of its technology and services,” the legal team wrote, adding that the “losses would not have occurred, or would have been substantially reduced, had Circle taken timely action.”
The suit includes allegations of negligence and aiding and abetting conversion, with damages to be determined at trial. Lawyers for the claimants also pointed to a prior enforcement action to challenge any suggestion that intervention was not feasible.
About a week before the Drift breach, Circle froze 16 USDC-linked wallets tied to a sealed civil case in the United States. Claimants argue this demonstrates both the technical capability and an operational precedent for Circle to act when funds are at risk.
The dispute centers on a large-scale exploit targeting Solana-based Drift Protocol. Attackers drained more than $285 million, which the article says accounted for over 50% of the platform’s total value locked at the time.
DeFiLlama data cited in the filing shows Drift’s total value locked has since fallen to around $251 million, down from a $1.5 billion peak recorded in September 2025.
On-chain analysis described the attacker converting assets rapidly into stablecoins, including USDC, before bridging a portion to Ethereum and swapping into Ether. Investigators also tracked parts of the proceeds through Tornado Cash, a privacy tool often used to obscure transaction trails.
Elliptic linked the activity to suspected North Korean state-backed actors, noting that more than 100 transactions passed through Circle’s infrastructure during U.S. working hours.
Drift Protocol confirmed the incident as it unfolded, suspending deposits and withdrawals while working with security firms and exchanges, stating: “Drift Protocol is experiencing an active attack. Deposits and withdrawals have been suspended.”
The case also raises questions about how much responsibility stablecoin issuers carry when they retain control over token contracts. Circle can freeze assets at the contract level, but the article notes that acting without a legal order can expose firms to regulatory and reputational risks.
Lorenzo Valente, director of digital asset research at ARK Invest, said the decision to freeze or not freeze is difficult to standardize.
“Every future freeze is now a judgment call. Every non-freeze is a political statement. Why freeze the Drift hacker but not that sketchy Nigerian fraud wallet? Why this protester but not that one?”
Valente added that whether Circle “got it right” depends on how rule-of-law principles are weighed against concrete harm, noting that “reasonable people disagree.”
After the exploit, Drift has taken steps that the article says reduce reliance on Circle’s infrastructure. Drift secured nearly $150 million in fresh funding for recovery efforts, including $127.5 million from Tether.
The capital is intended to compensate affected users and prepare a relaunch centered on USDT as the primary settlement asset on Solana. Plans also include a credit line tied to future revenues, liquidity support for market makers, and ecosystem grants aimed at restoring activity. A recovery token is also in development to allow affected users to claim from a pool backed by trading fees and newly raised funds.
Paolo Ardoino, CEO of Tether, said the priority is restoring stability and rebuilding trust.
“The focus is on restoring user confidence and supporting a strong relaunch, with a structure that aligns recovery with real activity and long-term growth.”
The article reports that market response has already begun, with DRIFT rising 20% to above $0.061, its highest level since the day of the exploit.
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