Circle Sued Over $280M Drift Hack, Accused of Failing to Freeze Stolen USDC

• In a US district court in Massachusetts on Wednesday, Drift investor Joshua McCollum brought a lawsuit on behalf of more than 100 members.
• Crypto corporations that hold on to their users’ funds are caught in a legal limbo in this instance.

The class action complaint against Circle Internet Group was initiated by an investor in the Drift Protocol. The investor claims that Circle failed to seize the $280 million in funds that were taken in the April 1 hack of the protocol.

In a US district court in Massachusetts on Wednesday, Drift investor Joshua McCollum brought a lawsuit on behalf of more than 100 members. The lawsuit accused Circle of enabling the attackers to transfer USDC worth approximately $230 million from Solana to Ethereum over the course of several hours using Circle’s Cross-Chain Transfer Protocol (CCTP) without any intervention.

“Circle permitted this criminal use of its technology and services,” attorneys representing McCollum wrote, adding: “These losses would not have occurred, or would have been substantially reduced, had Circle taken timely action.”

Caught in a Legal Limbo

Circle is being sued for negligence and aiding and abetting conversion. At trial, the amount of damages sought will be decided by Mira Gibb, the legal firm representing McCollum and other Drift investors.

Crypto corporations that hold on to their users’ funds are caught in a legal limbo in this instance. Companies in this position typically claim regulatory limitations or a lack of immediate legal power as grounds for not acting, even when they have the technological capacity to intervene or freeze assets. As a result, responsibility remains unclear while exploits occur in real-time.

Circle had the technological ability to freeze 16 USDC wallets in connection with a sealed US legal action roughly a week before the Drift incident, according to McCollum’s attorneys.

During US business hours, the stablecoin startup Circle processed over a hundred transactions using its bridging technology, leading crypto analytics firm Elliptic to think that the attack was carried out by hackers sponsored by North Korea. To hide the trail and launder the money, it was transferred via the Tornado Cash privacy protocol after being converted into Ether.

Highlighted Crypto News Today:

Bitcoin Maintains Momentum as Bulls Set Sights on $80K Breakout