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Circle Internet Group is facing a class action lawsuit led by Drift investor Joshua McCollum in a U.S. district court in Massachusetts. The complaint, filed Wednesday on behalf of more than 100 members, alleges that Circle allowed attackers to transfer about $230 million worth of USDC from Solana to Ethereum over several hours using Circle’s Cross-Chain Transfer Protocol (CCTP) without intervention.
Attorneys representing McCollum wrote that “Circle permitted this criminal use of its technology and services,” adding that “these losses would not have occurred, or would have been substantially reduced, had Circle taken timely action.” The suit accuses Circle of aiding and abetting conversion as well as negligence.
Mira Gibb, the law firm representing McCollum and other Drift investors, is seeking damages, with the final amount to be determined at trial.
The case centers on a legal grey area for crypto firms that may have the technical ability to intervene or freeze assets but often do not, citing regulatory constraints or the absence of immediate legal authority. McCollum’s lawyers argued that Circle had the capability to act, pointing to an earlier step taken by the company.
According to the complaint, Circle froze 16 USDC wallets in connection with a sealed U.S. civil case about a week before the Drift incident, which McCollum’s attorneys cited as evidence that Circle could have frozen funds during the later exploit.
Crypto analytics firm Elliptic suspected the exploit was carried out by North Korean state-backed hackers. Elliptic said the attackers made more than 100 transactions using Circle’s bridging technology during U.S. working hours, when the stablecoin company is based.
The funds were converted into Ether and then sent through the Tornado Cash privacy protocol to launder proceeds and obscure the transaction trail.
Cointelegraph reached out to Circle for comment but did not receive an immediate response.
The dispute has also drawn attention from industry participants. ARK Invest’s director of research for digital assets, Lorenzo Valente, argued on Thursday that Circle’s decision not to freeze funds was the right one.
Valente said that freezing without a legal order can create room for arbitrary discretion, framing the issue as a difficult trade-off between legal process and immediate harm reduction. He questioned how future freezes would be decided, asking: “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?”
While Valente supported Circle’s approach, he also speculated about the potential downstream use of the stolen funds, saying they will likely fund North Korea’s nuclear weapons program. He added: “Whether Circle got it right comes down to how much you weigh rule-of-law principles vs concrete harm. Reasonable people disagree.”
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