A Court Order, a Single Blacklist, and 12.6 Million USDC Frozen at Once

Circle froze roughly 12.6 million USDC on May 30, 2026, by blacklisting the Ethereum contract behind Zama’s confidential USDC token.

The move came from a court order, not a unilateral call. A U.S. District Court for the Northern District of California issued the directive in connection with a class action against Overnight Finance creator Maxim Ermilov.

The contract got hit at 1:08 a.m. UTC. The order set a hearing for Monday, June 1, 2026.

Here is the part that stings.

Because cUSDC is a wrapper holding backing USDC for every token holder, blacklisting the contract locked the whole pool. One flagged address triggered a freeze that trapped everyone.

Rand Hindi, Zama’s co-founder and CEO, posted that the team was investigating.

We are investigating the cUSDC contract freeze. I will update here as the situation progresses.

— Rand (@randhindi) May 30, 2026

He later said plainly that the issue had nothing to do with Zama or with privacy technology.

Thanks to @zachxbt, we found the root cause and will be taking the appropriate actions to unblock the situation. Tldr; this has nothing to do with Zama, or privacy.

The issue stems from an address related to the Overnight Finance hack, which deposited over ~$12.5m USDC into our… https://t.co/PThaUVEwAH

— Rand (@randhindi) May 30, 2026

The Block laid out the mechanics of the blacklist and why Zama says the freeze swept beyond one wallet:

Source: The Block

Circle froze roughly $12.6 million in USDC early Saturday morning by blacklisting the Ethereum contract behind open-source cryptography firm Zama’s confidential USDC token, dragging a privacy protocol into a dispute it apparently had no direct part in.

The blacklist hit the cUSDC contract at 1:08 a.m. UTC, locking 12,606,386 USDC. Public block explorers label the frozen address as Zama’s confidential USDC token.

Rand Hindi, co-founder and CEO of Zama, said on X that the company was looking into the freeze.

He later wrote that the contract appeared to have been “caught in a crossfire of another case.” Hindi also said he was given no warning by Circle prior to the freeze.

Because cUSDC is a wrapper that holds the USDC backing every confidential token holder, blacklisting the contract locks the entire pool rather than one person’s deposit. The 12.6 million USDC frozen is slightly more than the disputed deposit, which suggests other users’ funds were swept in alongside it.

That distinction carries weight. A mixer exists to obscure flows.

An infrastructure provider builds tooling that legitimate users run for ordinary reasons.

Zama is making the case that it sits in the second bucket, and that the court order swept up the wrong people along with the right one.

Bitcoin.com News reported the court and wallet details this way:

Source: Bitcoin.com News

Circle blacklisted a publicly labeled Ethereum smart contract tied to Zama’s privacy protocol on Saturday, freezing approximately $12.6 million in USDC following a U.S. federal court order connected to a civil lawsuit against Overnight Finance founder Maxim Ermilov.

The frozen address, 0xe978F22157048E5DB8E5d07971376e86671672B2, is labeled “Zama: cUSDC Token” on Etherscan and in Zama’s own documentation.

It functions as a pooled confidential USDC wrapper using fully homomorphic encryption to obscure token balances. Circle executed the blacklist around 1:08 UTC, halting redemptions for all users holding cUSDC in the contract.

The freeze reportedly stems from a class-action lawsuit filed May 28, 2026, in the U.S. District Court for the Northern District of California.

The case, Newton AC/DC Fund LP et al. v. Maxim Ermilov et al., alleges Ermilov misappropriated more than $15 million from Overnight Finance’s treasury.

Judge P. Casey Pitts issued a temporary restraining order on May 29, directing Circle to blacklist assets linked to the alleged transfer.

A full hearing is scheduled for June 1, 2026.

The broader lesson lands on anyone holding tokenized dollars. USDC ranked No. 6 by market cap on CoinGecko’s May 30 market table.

It is one of the most trusted stablecoins in the market.

The market table from CoinGecko shows why this is a top-asset stablecoin story:

Source: CoinGecko

Bitcoin (BTC): market-cap rank 1; market cap $1,479,829,477,259. Ethereum (ETH): market-cap rank 2; market cap $244,538,146,767.

Tether (USDT): market-cap rank 3; market cap $188,204,932,820. BNB (BNB): market-cap rank 4; market cap $97,003,747,828.

XRP (XRP): market-cap rank 5; market cap $83,486,952,551. USDC (USDC): market-cap rank 6; market cap $75,854,256,109.

Solana (SOL): market-cap rank 7; market cap $47,955,124,138. TRON (TRX): market-cap rank 8; market cap $32,895,147,281.

Figure Heloc (FIGR_HELOC): market-cap rank 9; market cap $18,614,416,923. Dogecoin (DOGE): market-cap rank 10; market cap $15,638,319,360.

Hyperliquid (HYPE): market-cap rank 11; market cap $15,078,402,244. USDS (USDS): market-cap rank 12; market cap $11,038,643,378.

LEO Token (LEO): market-cap rank 13; market cap $9,273,584,917. Rain (RAIN): market-cap rank 14; market cap $8,934,125,118.

Zcash (ZEC): market-cap rank 15; market cap $8,884,196,355.

Trust and reversibility are different things. The same blacklist function that lets Circle comply with U.S. courts can lock a shared contract in a single transaction, and pooled wrappers turn one targeted order into a pool-wide event.

Builders designing confidential or wrapped stablecoin products will study this one closely.

The answer is not to abandon compliance-ready stablecoins. The answer is to architect pools so a single court-flagged depositor can be isolated without freezing every honest holder beside them.

The freezing of Overnight Finance's absconded with funds in @zama is a win for DeFi.

A governance vote to return funds to investors was lodged. OVN's Max unilaterally announced a move of funds to his own wallets and then to Zama.

Voters (including our prop arm, @PatagonLLC)… https://t.co/mH5Yrw6kAR

— Diogenes (@diogenes) May 30, 2026

For now the funds sit locked, and the June 1 hearing decides how fast Zama can pull the innocent participants out. The freeze did its job on the flagged address.

Whether the court lets everyone else out clean is the question that matters to the next stablecoin builder watching this.

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