Circle Freezes $12.6M in Zama's USDC Contract After Court Order

Key facts Stablecoin issuer Circle blacklisted the Ethereum contract behind Zama's confidential USDC (cUSDC) token at 01:08 UTC on 30 May 2026. On-chain investigator ZachXBT traced the frozen balance to 12,606,386 USDC. Circle has not issued a public statement on the action.

The cUSDC contract is a pooled wrapper that uses fully homomorphic encryption (FHE) to mask USDC balances on Ethereum. Because users' assets are held in a shared contract, the blacklist locked every depositor's funds alongside the disputed amount — not just the targeted address.

"Regardless, it's precedent-setting to unilaterally freeze the contracts or addresses of a protocol where funds have been commingled with Zama users." — ZachXBT, on-chain investigator, 30 May 2026

Judge P. Casey Pitts issued the TRO on 29 May in a lawsuit alleging Overnight Finance's founder moved $15.77MThe freeze followed a temporary restraining order (TRO) issued on 29 May 2026 by U.S. District Judge P. Casey Pitts. The case, Newton AC/DC Fund LP et al. v. Maxim Ermilov et al., was filed 28 May in the Northern District of California. The order was issued ex parte, meaning Ermilov's side had not yet been heard; the June 1 hearing allows both sides to present arguments.

Plaintiffs allege Overnight Finance founder Maxim Ermilov moved more than $15.77M from the protocol's treasury on 11 May 2026, just before an OVN holder vote to liquidate and distribute funds. A wallet linked to those funds deposited $12.4M USDC into Zama's cUSDC contract the same day, representing more than 99% of the frozen pool. Ermilov disputes the allegations, describing the wallets as personal and team funds.

Zama received no advance notice and paused all wrapper contracts pending a June 1 hearingZama said it received no advance notice from Circle or the court before the blacklist executed. The contract had been publicly deployed for 154 days and the depositing wallet showed no sanctions flags or know-your-transaction (KYT) alerts at the time of deposit. As a precaution, Zama paused its cUSDC, cUSDT, and cWETH wrapper contracts. The company's legal team is working to isolate the flagged deposit to restore access for users not connected to the Overnight Finance dispute.

"This has nothing to do with Zama, or privacy." — Rand Hindi, Co-founder & CEO, Zama, 30 May 2026 The cUSDC contract is a pooled wrapper that uses fully homomorphic encryption (FHE) to mask USDC balances on Ethereum. Because users' assets are held in a shared contract, the blacklist locked every depositor's funds alongside the disputed amount — not just the targeted address.

"Regardless, it's precedent-setting to unilaterally freeze the contracts or addresses of a protocol where funds have been commingled with Zama users." — ZachXBT, on-chain investigator, 30 May 2026

"This has nothing to do with Zama, or privacy." — Rand Hindi, Co-founder & CEO, Zama, 30 May 2026 "Regardless, it's precedent-setting to unilaterally freeze the contracts or addresses of a protocol where funds have been commingled with Zama users." — ZachXBT, on-chain investigator, 30 May 2026

"This has nothing to do with Zama, or privacy." — Rand Hindi, Co-founder & CEO, Zama, 30 May 2026 Judge P. Casey Pitts issued the TRO on 29 May in a lawsuit alleging Overnight Finance's founder moved $15.77MThe freeze followed a temporary restraining order (TRO) issued on 29 May 2026 by U.S. District Judge P. Casey Pitts. The case, Newton AC/DC Fund LP et al. v. Maxim Ermilov et al., was filed 28 May in the Northern District of California. The order was issued ex parte, meaning Ermilov's side had not yet been heard; the June 1 hearing allows both sides to present arguments.

"This has nothing to do with Zama, or privacy." — Rand Hindi, Co-founder & CEO, Zama, 30 May 2026 The freeze followed a temporary restraining order (TRO) issued on 29 May 2026 by U.S. District Judge P. Casey Pitts. The case, Newton AC/DC Fund LP et al. v. Maxim Ermilov et al., was filed 28 May in the Northern District of California. The order was issued ex parte, meaning Ermilov's side had not yet been heard; the June 1 hearing allows both sides to present arguments.

"This has nothing to do with Zama, or privacy." — Rand Hindi, Co-founder & CEO, Zama, 30 May 2026 Plaintiffs allege Overnight Finance founder Maxim Ermilov moved more than $15.77M from the protocol's treasury on 11 May 2026, just before an OVN holder vote to liquidate and distribute funds. A wallet linked to those funds deposited $12.4M USDC into Zama's cUSDC contract the same day, representing more than 99% of the frozen pool. Ermilov disputes the allegations, describing the wallets as personal and team funds.

"This has nothing to do with Zama, or privacy." — Rand Hindi, Co-founder & CEO, Zama, 30 May 2026 Zama said it received no advance notice from Circle or the court before the blacklist executed. The contract had been publicly deployed for 154 days and the depositing wallet showed no sanctions flags or know-your-transaction (KYT) alerts at the time of deposit. As a precaution, Zama paused its cUSDC, cUSDT, and cWETH wrapper contracts. The company's legal team is working to isolate the flagged deposit to restore access for users not connected to the Overnight Finance dispute.

"This has nothing to do with Zama, or privacy." — Rand Hindi, Co-founder & CEO, Zama, 30 May 2026 "This has nothing to do with Zama, or privacy." — Rand Hindi, Co-founder & CEO, Zama, 30 May 2026 Cryptocurrencies are highly volatile and involve significant risk. You may lose part or all of your investment. All information on Coinpaprika is provided for informational purposes only and does not constitute financial or investment advice. Always conduct your own research (DYOR) and consult a qualified financial advisor before making investment decisions. Coinpaprika is not liable for any losses resulting from the use of this information.