Circle is contesting a criminal case in Wisconsin that accuses the company behind the USDC stablecoin of failing to return cryptocurrency stolen from a scam victim, a dispute that surfaced publicly this week.

The case drew wider attention after the International Consortium of Investigative Journalists detailed it this week. Prosecutors in Walworth County filed a criminal complaint in April, alleging that Circle “did intentionally disobey, resist, or obstruct” a warrant directing it to seize 381,235 stolen USDC and hand an equal amount to the local sheriff’s office. It lists a single misdemeanor count, an unusual charge for a state prosecutor to bring against a major financial firm.

Circle moved to dismiss the case on June 30, calling the complaint meritless. In the filing, it argued that once USDC leaves its control for a third party’s wallet, it has “no ability to invalidate and reissue such USDC”, and that the court lacked jurisdiction because both the company and the tokens sit outside Wisconsin, in Boston. Circle also contends the matter is wrongly styled as criminal, since contempt subject to punitive sanctions “is not a crime”.

The case traces back to about May of last year, when a Walworth County man received an unsolicited text from someone calling herself Lenora. She persuaded him they were in a relationship, then got him to convert part of his savings into USDC and send it to a scammer, court records show.

A county court ordered Circle to freeze the tokens in August 2025, which it did by blocklisting the wallet. But a second warrant that December told Circle to invalidate the tokens and reissue new ones, or turn over the equivalent in cash, which Circle said it could not do.

Assistant District Attorney Thomas Binger said the anonymity of cryptocurrency has left investigators outmatched. “The tools that are at our disposal are not keeping up with the tools the criminals are using,” he said in an interview with ICIJ, whose reporters reviewed the court records. The standoff echoes a letter New York prosecutors sent U.S. senators in January, which claimed Circle declined to freeze tokens without a court order and did not honor orders to return stolen funds.

Critics point to rival issuer Tether, whose software can destroy tokens in a suspect wallet and reissue them to law enforcement, effectively returning stolen money. Circle has drawn similar criticism before, including for declining to freeze more than $270 million tied to a 2026 exploit of the Drift protocol. In a blog post in April, Circle said it freezes tokens only when “legally compelled by an appropriate authority, through lawful process”, a stance it frames as protecting users from “arbitrary or politically motivated interference”. In the filing, Circle said it had also reached an understanding with federal prosecutors on a way to compensate victims.

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