The Wisconsin State Prosecutor's Office has filed a criminal case against Circle, the issuer of the USDC stablecoin. The reason was the company's refusal to comply with a court order and return approximately $381,000 to a Walworth County resident, which he lost as a result of scammers' actions. This step is unprecedented and has exposed a long-standing conflict over the boundaries of responsibility for digital asset issuers.
How a Romance Scam Led to Legal Action Against Circle
In May 2025, the victim met a scammer posing as Lenora. Under the guise of a romantic relationship, she convinced the man to invest his savings in USDC on a fake investment platform. The district court ordered Circle to freeze these tokens back in August last year — the company complied with the request. However, in December, the judge ordered the coins to be voided and an equivalent amount to be issued to the victim's account. Circle refused, citing technical limitations and lack of jurisdiction, after which an administrative case for obstruction of justice was filed against the company.
Detective Scott Simons from Milwaukee County recorded over a dozen cases where court orders arrived too late. The FBI, incidentally, reported record losses from crypto crimes in 2025 — the amount exceeded $11.4 billion, with over 18,500 people losing $100,000 or more. Law enforcement methods are clearly lagging behind new schemes using artificial intelligence.
Why Tether Returns Stolen Funds, But Circle Does Not
Circle's main competitor, USDT issuer Tether, often assists investigations even without official court decisions. The company has frozen crypto assets totaling $4.7 billion linked to illegal activities and returned about $1.1 billion to rightful owners. Specialized software allows for remotely voiding coins on hackers' addresses and reissuing them to victims. The joint T3 unit with TRON recently froze over $450 million, and U.S. authorities seized $61 million in illegal USDT funds.
The differences are explained by the companies' architecture and approaches, not by 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, which has strengthened USDC's position in Europe amid the implementation of the MiCA regulation. Meanwhile, offshore Tether adheres to a flexible cooperation policy to improve its compliance reputation.
According to Joshua Cooper-Duckett from Cryptoforensic Investigators, Circle could change the token code and implement a "burning" capability. Circle's Head of Policy, Dante Disparte, noted that technical tools exist, but legal mechanisms for rapid response are currently lacking. New York prosecutors highlight the incentive problem: Circle continues to earn income from reserves backing the frozen tokens. According to analyst Yuri Serov's estimate, at least 119 million USDC are currently frozen.
Recently, Circle reached an agreement with the federal prosecutor's office on a compensation mechanism for victims: "dirty" tokens will be permanently blocked, and new ones will be issued to owners. If the mechanism affects Walworth County, several administrative cases may be initiated simultaneously. The final decision could set standards for stablecoin issuer participation in compensating fraud victims.
Expert Opinion: This case is a warning signal for the entire industry. If Circle does not adapt its processes to the realities of fighting fraud, regulatory pressure will only increase. Tether has already shown that flexibility and speed of response are a competitive advantage, not a weakness. The stablecoin market is on the verge of revising responsibility standards.