Circle Internet Financial, the issuer of the USDC stablecoin, is dealing with legal challenges after failing to assist in recovering stolen funds from victims of scams. The Walworth County District Attorney’s Office in Wisconsin filed a misdemeanor contempt of court charge against Circle on April 20, 2026, raising significant questions about the obligations of stablecoin issuers.
In December 2025, a Wisconsin judge ordered Circle to help recover approximately 381,235 USDC that was part of fraud schemes preying on local residents. In these scams, one victim lost $770,000, while another lost $460,000, resulting in total losses exceeding $1.2 million. Circle contends that it cannot fulfill the court's request, arguing that it lacks the technical capacity to invalidate and reissue the USDC tokens as the court directed.
Circle did, however, manage to freeze the stolen USDC, an action it can take. Yet, the distinction between merely freezing the funds and retrieving them remains critical to this legal case.
As the case develops, Circle has filed a motion to dismiss the criminal complaint. Its arguments focus primarily on jurisdictional issues, claiming that the Wisconsin court lacks the authority over its operations and questioning its engagement in the legal process.
A notable twist involves the revelation that as of January 2026, prosecutors in New York highlighted Circle's profit from interest accrued on at least 119 million USDC that was frozen due to court orders. This means while victims await justice, Circle continues to generate income from the very funds meant to be returned.
Circle warns that creating a mechanism to invalidate USDC tokens could lead to significant future obligations and risks. This case emerges at a crucial time as discussions about stablecoin regulation are underway in Congress. Should Circle's jurisdictional argument prevail, state courts may face limitations in compelling issuers to assist in fraud recovery, potentially shifting oversight to federal authorities alone.
The decision to pursue criminal contempt, rather than a civil route, implies a more aggressive approach from local prosecutors against companies that appear to disregard court authority.