The Walworth County (Wisconsin) District Attorney's Office has filed a criminal case against the issuer of the USDC stablecoin — the company Circle. The reason was the refusal of the corporation, valued at $17 billion, to comply with a court order to return funds to a victim of a "romantic" scam. This case has revealed a fundamental difference in the approaches of two market giants — Circle and Tether — to the issue of compensating losses for affected users.
The Case of "Romantic" Deception and Legal Confrontation
In May 2025, a Walworth resident fell victim to a scammer who introduced herself as Lenora. Under the guise of a romantic relationship, she convinced him to invest part of his savings in USD Coin (USDC) on a fake investment platform. The district court ordered Circle to freeze these tokens back in August, which the company did. However, in December, the judge ordered the coins to be annulled and an equivalent amount to be issued to the victim's accounts. Circle refused to comply with this order, citing technical limitations of smart contracts and a lack of jurisdiction. As a result, an administrative case for obstruction of justice was filed against the company.
Why Does Tether Succeed, But Circle Does Not?
Circle's key competitor, the issuer of USDT — Tether, demonstrates a fundamentally different strategy. The company actively cooperates with law enforcement and, without formal court decisions, has frozen crypto assets totaling $4.7 billion linked to illegal activities. Tether's specialized software allows it to remotely annul coins on hackers' addresses and reissue them for victims. Thanks to this technology, the company has returned approximately $1.1 billion to rightful owners. Moreover, the joint T3 unit (Tether, TRON) recently froze an additional $450 million.
The difference in approaches is explained not by the technical limitations of the blockchain, but by corporate philosophy and architecture. Circle, which went public on the New York Stock Exchange in June 2025, only blocks tokens when there are strict legal grounds. The company publicly states that this approach avoids arbitrary or politically motivated blockages, which has strengthened USDC's position in Europe under the MiCA regulation. Tether, on the other hand, adheres to a flexible policy of cooperation with law enforcement, seeking to improve its reputation in the compliance sphere.
The Problem of Incentives and the Impending Precedent
New York prosecutors highlight the issue of incentives: Circle continues to earn income from the reserves backing the frozen tokens. According to analyst Yuri Serov, at least 119 million USDC are currently frozen. Circle itself stated that it recently reached an agreement with the federal prosecutor's office on a compensation mechanism: "dirty" tokens will be permanently blocked, and new ones will be issued to victims.
If this mechanism is applied to the Walworth County case, several administrative cases could be initiated simultaneously. The final decision may set standards for stablecoin issuers' participation in compensating scam victims. The market awaits a clear legal precedent.
Expert Opinion: The current situation exposes a fundamental conflict between the decentralized nature of cryptocurrencies and the need to protect consumer rights. Circle has chosen the path of strict adherence to the letter of the law, which may be justified for a public company but leaves victims without swift assistance. Tether, in turn, uses flexibility to increase user loyalty but risks accusations of arbitrariness. The court's decision in the Circle case will be a crucial marker for the entire industry: can a regulator force an issuer to act faster than its "technical limitations" allow? I believe that in the long term, the market will require all issuers to implement mechanisms for rapid response to fraud, similar to those already used by Tether.