More than $420 million in alleged illicit funds linked to USDC (USDC) moved without timely freezes, according to blockchain investigator ZachXBT. The claim raises fresh concerns over enforcement speed at one of the largest regulated stablecoin issuers.
In a public thread on X, ZachXBT detailed 15 incidents where funds were not frozen quickly enough, including the recent Drift Protocol exploit exceeding $280 million. In that case, the attacker bridged roughly $232 million in USDC from Solana to Ethereum over six hours using Circle’s Cross-Chain Transfer Protocol (CCTP), with no immediate asset freeze reported.
Are Stablecoin Issuers Responding Fast Enough To Exploits?
ZachXBT argued that delays allowed attackers to convert funds before intervention, citing another case involving the $223 million Cetus Protocol exploit. There, approximately $61 million in USDC was bridged and later converted to Ether (ETH) before Circle blacklisted the address, which occurred about one month after requests were made.
The scrutiny comes as stablecoins play an expanding role in decentralized finance (DeFi) and global payments infrastructure. USDC’s circulating supply exceeds $77 billion, according to data, positioning it as the second-largest stablecoin behind Tether (USDT), which has faced its own transparency debates.
Circle responded by emphasizing its regulatory obligations and legal thresholds for intervention.
“We freeze assets when legally required, consistent with the rule of law and with strong protections for user rights and privacy,” a spokesperson said, adding that the Drift incident highlights the need for “stronger shared security” across the ecosystem.
Blockchain analytics firm Elliptic identified indicators suggesting involvement by North Korean actors in the Drift exploit, adding geopolitical weight to the incident. Yet the gap between exploit detection and enforcement continues to draw criticism from industry observers.
ZachXBT, who recently joined Paradigm as an incident response advisor, said the reported $420 million reflects only publicly known cases and may understate the total. The next catalyst will be whether regulators in the US and other jurisdictions push for stricter real-time compliance standards for stablecoin issuers.
