The Walworth County District Attorney's Office (Wisconsin) has filed a criminal case against Circle, the issuer of the USDC stablecoin. The reason is the refusal to comply with a court order to return funds to a fraud victim. The amount in question is approximately $381,000, which a local resident lost due to the actions of criminals using a romance scam scheme.
This precedent reveals deep contradictions in the approaches of the two largest stablecoin issuers — Tether (USDT) and Circle (USDC) — to the issue of compensating losses for affected users. While Tether actively cooperates with law enforcement and has returned over $1.1 billion to rightful owners, Circle, on the other hand, cites technical and legal limitations, refusing to take similar actions.
How a Romance Scam Led to Legal Action Against Circle
In May 2025, a resident of Walworth County 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 USDC on a fake investment platform. The district court ordered Circle to freeze these tokens back in August of last year, which the company complied with. However, in December, the judge ordered the cancellation of these coins and the issuance of an equivalent amount to the victim's account. Circle ignored this order, leading to the initiation of an administrative case for obstruction of justice.
"The tools at our disposal are no longer keeping pace with the tools used by scammers," noted Prosecutor Thomas Binger.
Detective Scott Simons from Milwaukee County has documented over a dozen cases where court orders came too late — the funds had already been withdrawn. Meanwhile, the FBI reported record losses from crypto crimes in 2025, exceeding $11.4 billion. Over 18,500 people lost amounts ranging from $100,000, and law enforcement methods are clearly lagging behind new schemes using artificial intelligence.
Why Tether Returns Stolen Funds, and Circle Does Not
Circle's main competitor, the issuer of the largest stablecoin USDT, often assists investigations even without official court orders. Tether's management states that it has frozen crypto assets totaling $4.7 billion linked to illegal activity. The company's specialized software allows it to remotely cancel coins at hacker addresses and reissue them for victims. Thanks to this technology, the company has been able to return approximately $1.1 billion to rightful owners.
Recently, Tether's T3 unit, in collaboration with TRON, froze over $450 million. Additionally, U.S. authorities seized illegal funds in USDT amounting to $61 million in one case.
The differences are explained by the architectural features and approaches of the companies, not by the technical limitations of the blockchain. Circle, which went public on the New York Stock Exchange in June 2025, only blocks tokens when there are legal grounds. This practice helps avoid arbitrary or politically motivated blocks. As a result, USDC has strengthened its position in Europe amid the introduction of the MiCA regulation.
At the same time, offshore-based Tether adheres to a flexible cooperation policy to improve its compliance reputation.
According to Joshua Cooper-Duckett of Cryptoforensic Investigators, Circle could change the token's code and implement the ability to "burn" tokens. Circle's Head of Policy, Dante Disparte, noted that the technical tools exist, but the legal mechanisms for rapid response are currently lacking.
New York prosecutors highlight the issue of incentives. In January, they informed senators that Circle continues to earn income from the reserves backing the frozen tokens. According to blockchain analyst Yuri Serov, at least 119 million USDC are currently frozen.
Circle stated that it recently reached an agreement with the federal prosecutor's office regarding a compensation mechanism for victims. Under this process, "dirty" tokens will be permanently blocked, and new ones will be issued to the owners.
Cryptalist Analysis: The Circle case is not just a local incident but a potential turning point for the entire stablecoin industry. The Wisconsin court ruling could set a precedent, obligating issuers to more actively protect users. If Tether has already demonstrated that this is technically possible and beneficial for reputation, Circle risks facing a wave of lawsuits and regulatory pressure if it continues to maintain a hardline stance. The market will closely watch the outcome of this case — it could redefine standards of responsibility for all digital currency issuers.