Key Takeaways
Circle blacklisted Zama’s cUSDC Ethereum contract on Could 30, 2026, freezing $12.6M in pooled USDC funds.A U.S. federal court docket TRO tied to Newton AC/DC Fund LP’s lawsuit towards Maxim Ermilov triggered the freeze.Zama plans to isolate the flagged deposit earlier than a June 1 listening to to revive entry for unaffected customers.
Circle’s Zama Blacklist Freezes $12.6M, Elevating Questions About USDC Use in DeFi Contracts
The frozen tackle, 0xe978F22157048E5DB8E5d07971376e86671672B2, is labeled “Zama: cUSDC Token” on Etherscan and in Zama’s personal documentation. It features as a pooled confidential USDC wrapper utilizing absolutely homomorphic encryption to obscure token balances. Circle executed the blacklist round 1:08 UTC, halting redemptions for all customers holding cUSDC within the contract.
The freeze reportedly stems from a class-action lawsuit filed Could 28, 2026, within the U.S. District Courtroom for the Northern District of California. The case, Newton AC/DC Fund LP et al. v. Maxim Ermilov et al., alleges Ermilov misappropriated greater than $15 million from In a single day Finance’s treasury. Decide P. Casey Pitts issued a brief restraining order on Could 29, directing Circle to blacklist property linked to the alleged switch. A full listening to is scheduled for June 1, 2026.
Onchain investigator ZachXBT reported on the freeze by way of his Telegram channel and traced the core deposit. He discovered that pockets 0xf7Fcc767dE537953b3519D4b3097A24A6dFE1c84, tied to In a single day Finance treasury operations, deposited roughly 12.4 million USDC into Zama’s cUSDC contract on Could 11, 2026. That single influx represents greater than 99% of the frozen stability.
“Appears like Circle blacklisted the Zama (privateness protocol) Confidential USDC (cUSDC) contract on Ethereum 7 hours in the past, which has frozen 12.6M USDC of consumer funds,” ZachXBT wrote. He referred to as the motion precedent-setting, including: “General, I really feel dangerous for Zama customers who’ve now been not directly impacted with this mess of a U.S. civil case.”
In a single day Finance is a DeFi yield platform that issued the USD+ stablecoin and OVN governance token, elevating roughly $850,000 in seed funding in 2022. After OVN holders voted by way of Snapshot to liquidate and distribute the treasury following rug-pull allegations, roughly $15.77 million, together with the $12.5 million in USDC, was moved from treasury-linked wallets earlier than the vote finalized.
Ermilov, a Russian citizen primarily based within the Center East, disputes these characterizations and says the wallets held private and workforce funds, the OVN token carries no safety standing, and the transfer to Zama was for privateness and private safety causes.
Among the many plaintiffs is Patagon Administration, a Delaware entity related to Diogenes Casares and a sample of hostile DAO takeovers involving protocols together with Fei, Rome, Temple, and Spartacus. ZachXBT flagged Patagon’s involvement and famous the group’s historical past of asset freezes and DAO unwindings.
Zama says it obtained no advance discover from Circle or the court docket earlier than the blacklist was executed. The contract had been publicly deployed for roughly 154 days, and the depositing tackle confirmed no sanctions flags or KYT alerts on the time of deposit. Rand Hindi, Zama’s co-founder and CEO, said plainly: “This has nothing to do with Zama, or privateness.”
Hindi thanked ZachXBT for serving to determine the basis trigger and confirmed that every one deposit exercise was seen on public block explorers. Zama has since paused its cUSDC, cUSDT, and cWETH wrappers whereas its authorized workforce engages U.S. counsel. The workforce says it should isolate the flagged deposit to revive entry for customers not linked to the In a single day dispute.
The state of affairs revives ongoing criticism of Circle’s blacklisting practices. ZachXBT beforehand reported, the month prior, that Circle froze greater than 16 scorching wallets belonging to companies and protocols with out rationalization. Critics have additionally famous inconsistencies in response instances, pointing to slower motion throughout alternate hacks in comparison with quicker execution on civil court docket orders.
Zama describes its protocol as infrastructure. The system obscures token balances utilizing FHE however doesn’t conceal sender or recipient addresses, and the corporate has been specific that it doesn’t operate as a mixer or tumbler. The court-ordered freeze hit a pooled contract relatively than the particular depositor’s tackle, that means unrelated customers misplaced entry to their funds.
The June 1 listening to could produce an isolation order or partial launch. Till then, roughly $12.6 million in USDC stays locked, and the case raises direct questions in regards to the scope of centralized stablecoin blacklisting in public, commingled DeFi contracts.