Double Standards of Stablecoins: Why Tether Returns Billions While Circle Ignores Scam Victims
The District Attorney's Office of Wisconsin has initiated criminal proceedings against USDC issuer Circle. The basis is the refusal to comply with a court order to return approximately $381,000 to a fraud victim. This precedent reveals fundamental differences in the approaches of the two largest stablecoin issuers to user protection.
In May 2025, a resident of Walworth County fell victim to a romance scam: a fraudster, posing as Lenora, convinced him to invest his savings in USDC on a fake investment platform. The court ordered Circle to freeze these tokens back in August, and in December to cancel them and issue an equivalent amount to the victim's account. However, Circle refused, citing technical limitations and lack of jurisdiction. As a result, an administrative case for obstruction of justice was initiated against the company.
Prosecutor Thomas Binger rightly noted that law enforcement tools are no longer keeping pace with those of fraudsters. Detective Scott Simons from Milwaukee County recorded over a dozen cases where court orders arrived too late. The FBI reported record losses from crypto crimes in 2025 — over $11.4 billion, with more than 18,500 people losing amounts exceeding $100,000.
Why does Tether return funds, but Circle does not?
Circle's key competitor, Tether, demonstrates a fundamentally different approach. Tether's management reports freezing crypto assets totaling $4.7 billion linked to illegal activity. The company's specialized software allows for the remote cancellation of coins on hackers' addresses and their re-issuance for victims. Thanks to this technology, Tether has returned approximately $1.1 billion to rightful owners. In collaboration with TRON, the T3 unit froze over $450 million, and U.S. authorities seized $61 million in USDT in one case.
The differences are explained not by blockchain technical limitations, but by the companies' architecture and approaches. Circle, which listed 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 and strengthened USDC's position in Europe after the introduction of MiCA. Offshore Tether adheres to a flexible cooperation policy to improve its compliance reputation.
According to expert Joshua Cooper-Duckett, Circle could modify the token's code and implement a "burning" capability. Circle's Head of Policy, Dante Disparte, acknowledged that technical tools exist but emphasized the lack of legal mechanisms for rapid response. New York prosecutors highlighted the incentive problem: Circle continues to earn income from the 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: "dirty" tokens will be permanently blocked, and new ones will be issued to owners. If this mechanism applies to Walworth County, several administrative cases could be initiated simultaneously. The final decision may set standards for stablecoin issuer participation in compensating fraud victims.
Expert opinion: This case will be a litmus test for the entire industry. Circle, positioning itself as a "regulated" player, faces a paradox: strict adherence to the letter of the law results in inaction where flexibility is needed. Tether, on the other hand, uses its freedom for rapid response but risks sliding into arbitrariness. The market needs a clear legal mechanism that balances victim protection and issuer rights — otherwise, trust in stablecoins will be undermined completely.