Circle Sued After Alleged Failure To Freeze Funds In $280 Million Drift Exploit

TLDR

• Plaintiffs sued Circle in Massachusetts over its response to the April 1 Drift exploit.
• The complaint says attackers moved stolen funds through Circle’s CCTP from Solana to Ethereum.
• Plaintiffs say Circle had authority to freeze USDC but did not act during the transfer window.
• Drift said the exploit drained about $280 million and led to a halt in deposits and withdrawals.
• Circle CEO Jeremy Allaire said freezes follow law enforcement or court directions.

Circle is facing a class action lawsuit after the April 1 Drift Protocol exploit. Plaintiffs say the company failed to freeze stolen USDC during the attack’s aftermath. The case focuses on Circle’s alleged inaction as about $280 million left Drift.

Circle lawsuit centers on USDC freeze claims

The complaint was filed in Massachusetts by Drift investors represented by Gibbs Mura. It says Circle had technical and contractual authority to freeze USDC. Yet plaintiffs claim Circle did not act while funds moved across chains.

According to the filing, attackers drained about $280 million to $285 million in under 12 minutes. The stolen assets then moved from Solana to Ethereum through Circle’s CCTP. Plaintiffs say that transfer lasted about eight hours during U.S. business hours.

The filing also points to another civil matter from nine days earlier. In that case, Circle froze 16 unrelated business wallets. Plaintiffs say that shows Circle could act when it chose to do so.

Drift exploit caused wider losses across platform

Drift said the attacker gained unauthorized access and added a malicious asset. The attacker also removed withdrawal limits before funds were drained. The platform said the group posed as a quantitative trading firm for six months.

User funds were taken from trading accounts, lending pools, and vault deposits, according to the lawsuit. Drift’s total value locked fell from about $550 million to under $250 million. Soon after, the platform suspended deposits and withdrawals indefinitely.

Plaintiffs say the fallout reached beyond Drift. At least 20 DeFi protocols reported indirect losses tied to exposure to Drift. That widened the damage across parts of the Solana ecosystem.

Circle defends policy as Drift seeks recovery

Onchain investigator ZachXBT also criticized Circle’s response after the exploit. He wrote that Circle had “six hours” to freeze stolen funds. He also alleged the attacker moved more than $230 million in USDC through CCTP.

Circle CEO Jeremy Allaire defended the company’s policy this week. He said Circle freezes wallets only when law enforcement or courts direct it. He said acting outside legal process could become a “moral quandary”.

Meanwhile, Drift said it secured a proposed recovery package. The package includes up to $127.5 million from Tether and $20 million from other partners. Drift said the plan supports user recovery and a relaunch as a USDT-based perpetual DEX on Solana.

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