ZachXBT Calls Out Circle for USDC Compliance Failures

• ZachXBT accuses Circle of delaying action, allowing $240M in USDC to reach North Korea-linked hackers.
• Funds tied to the Lazarus Group reportedly stayed active for weeks, raising serious compliance concerns.
• Circle defends its stance, saying freezes require legal orders, but critics argue delays risk enabling illicit crypto flows.

Blockchain investigator ZachXBT has heavily criticized Circle, accusing the stablecoin issuer of allowing over $240 million in funds to reach North Korea through several hacks. In a tweet, ZachXBT pointed out that Circle failed to act quickly, despite clear requests from law enforcement. 

He pointed out how the process of freezing the money connected to Lazarus, the hacking group in North Korea, was slow, although Circle had the capacity to freeze the accounts. ZachXBT mentioned that such a delay violates the terms and conditions of USDC. Thus, ZachXBT doubts the company’s security.

The point made by ZachXBT was preceded by a blog post from Circle, in which it justified its conduct by saying that the company only freezes the funds when required by the law. The company said it is ready to do so when it receives court orders or anything like that.

Still, ZachXBT thinks differently. According to him, the company’s response speed was far from acceptable, and the funds remained active for way too long.

Circle’s Compliance Under Scrutiny

In his investigation, ZachXBT found multiple examples of delays by Circle regarding the freezing of the funds that were stolen using USDC tokens. Sometimes, ill-gotten funds were held in wallets controlled by the hackers for weeks and sometimes even months.

Among others cited by ZachXBT is the USDC associated with the Lazarus hacking team, which conducts cyber-operations on behalf of North Korea.

The fact of delays by Circle in its operations has sparked concerns about the effectiveness of the compliance procedures used by Circle.

In their defense, Circle emphasized its responsibility under U.S. and EU regulations to freeze tokens solely in accordance with court orders and requests. Critics say that the company is doing more harm than good with its delay tactics.

Transparency and Accountability in Digital Assets

The problem with Circle dealing with the USDC that is being used for illegal purposes has led to a vigorous discussion within the crypto community on X. Some people have even suggested that Circle has been aiding money laundering practices because of their slow reaction.

Others believe that while Circle indeed has the power to block the use of certain USDC accounts, there should also be some middle ground where the interests of all stakeholders involved are considered.

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