Full Breakdown
Circle’s Stalled Cooperation in Wisconsin USDC Scam Highlights Gaps in Crypto Regulation
7/10/2026, 1:41:12 PM
Wisconsin Court Orders Circle to Freeze Stolen USDC
In May 2023 a Walworth County resident, identified in court records as “Victim #1,” received a text from a fraudster posing as “Lenora.” The scammer convinced the victim to convert savings into USDC and deposit the tokens into a fake investment platform. A Walworth County court ordered Circle Internet Financial to freeze the roughly 381,000 USDC that had been moved to a private wallet; Circle complied and froze the funds. In December 2023 a Wisconsin judge signed a warrant directing Circle to “facilitate the seizure” by invalidating the frozen tokens and issuing an equal amount of new USDC to the sheriff’s office. Circle denied the technical ability to do so, prompting Assistant District Attorney Thomas Binger to file a criminal complaint alleging the company “did intentionally disobey, resist, or obstruct” the order.
Background: Stablecoins and Law-Enforcement Challenges
USDC, a stablecoin pegged to the U.S. dollar, is issued by Circle, the second-largest stablecoin provider. Stablecoins can move between wallets in seconds, outpacing the time needed to obtain a court order. Law-enforcement agencies rely on issuers to freeze tokens and return them to victims, but the speed and pseudonymity of blockchain transactions complicate investigations.
Key Players
- Circle Internet Financial – issuer of USDC.
- Thomas Binger – Walworth County Assistant District Attorney.
- Scott Simons – Milwaukee County detective who consulted on the case.
- Tether – world’s largest stablecoin issuer, cited for contrasting practices.
- New York State prosecutors – sent a letter to U.S. senators criticizing Circle’s compliance.
- Transparency International – anti-corruption nonprofit commenting on pending legislation.
Data & Statistics
- 381,000 USDC (? $381,000) ordered frozen in the Wisconsin case.
- At least 119 million USDC tokens are currently frozen, according to blockchain researcher Yury Serov.
- Tether reports having frozen about $4.7 billion in illicit assets and reissuing $1.1 billion worth of tokens.
- U.S. fraud losses reached a record $16 billion in 2025, per the Federal Trade Commission.
- The Wisconsin scam cost two families nearly $800,000.
Official Statements & Responses
Circle argued it lacked the “ability to invalidate and reissue such USDC” and questioned the Wisconsin court’s jurisdiction. In a footnote to its filing, Circle noted a recent general agreement with federal prosecutors on a mechanism to permanently freeze certain USDC funds and reissue new tokens to victims, though it declined to confirm whether this method would apply in the current case. Tether’s spokesperson said the company “unequivocally condemns the illegal use of stablecoins and is fully committed to combating illicit activity.” New York prosecutors wrote that “Circle’s motive for not assisting law enforcement becomes crystal clear: it is financially preferable to only freeze cryptocurrency deemed to have been stolen, but not return the underlying asset… because Circle can continue to collect the interest.”
Criticism & Opposition
Detective Scott Simons said Circle “just are telling agencies that it’s impossible,” leaving victims “out of luck.” Crypto-forensic expert Joshua Cooper-Duckett noted that Circle could “simply update code” to enable token burning, a capability Tether already employs. Consumer-advocacy groups, including Transparency International, argue that the pending “Clarity Act” exempts many crypto intermediaries from anti-money-laundering rules, weakening law-enforcement authority.
Conflicting Reports & Gaps
Circle maintains a technical limitation on token invalidation, yet multiple experts dispute this claim, citing existing software that can “burn” and reissue tokens. No binding settlement between Circle and the Justice Department has been disclosed.
Verbatim Quotes
- “The tools that are at our disposal are not keeping up with the tools the criminals are using,” — Thomas Binger, Assistant District Attorney
- “unequivocally condemns the illegal use of stablecoins and is fully committed to combating illicit activity.” — Tether spokesperson
- “Circle’s motive for not assisting law enforcement becomes crystal clear: it is financially preferable to only freeze cryptocurrency deemed to have been stolen, but not return the underlying asset to law enforcement or any fraud victim, because Circle can continue to collect the interest through investment of the underlying funds,” — New York State prosecutors (letter)
- “Even when an identifiable company like Circle is involved, victims, detectives and prosecutors can still be left without the information and cooperation they need,” — Scott Greytak, Deputy Executive Director, Transparency International
- “It’s a step in the right direction in giving companies and law enforcement guidance,” — Stephanie Talamantez, Senior Managing Director, Guidepost Solutions
What’s Next
The House has passed the Clarity Act; the Senate is slated to vote in July, with possible amendments addressing the exemptions highlighted by law-enforcement groups. Meanwhile, Walworth County prosecutors seek a contempt finding against Circle to compel compliance.