Circle is facing a class-action lawsuit over its failure to freeze USDC in the $280 million Drift Protocol hack. As a result, CRCL stock price fell and erased almost all gains on Thursday after market hours.
Circle Faces Class Action in the Drift Protocol Hack
A class action lawsuit was filed in the Massachusetts District Court on behalf of Drift Protocol investors who suffered losses in the $280 million hack. The lawsuit by law firm Gibbs Mura, with Joshua McCollum as lead plaintiff, alleges that Circle Internet Financial failed to freeze stolen USDC despite having the technical capability and contractual authority.
Attackers reportedly linked to North Korea’s government bridged more than $230 million in stolen USDC from Solana to Ethereum using Circle’s Cross-Chain Transfer Protocol (CCTP) in more than 100 transactions over eight hours.
Drift Protocol revealed the perpetrators spent six months posing as a quantitative trading firm. The attackers used durable nonce accounts to pre-sign transactions that delayed execution. On-chain investigator ZachXBT also criticized Circle for no intervention despite a multi-hour window during U.S. business hours.
Drift Protocol later announced a $150 million recovery plan in partnership with Tether. The protocol is shifting from USDC to USDT as its core settlement asset.
Circle CEO Defends the Decision
Circle CEO Jeremy Allaire defended the company’s decision, stating that it only freeze USDC at the direction of formal law enforcement or court orders. He added that it helps avoid unilateral “moral quandaries” and potential legal risks.
“If there are others that believe that Circle should just step away from what the law says and do its own, make its own decisions, I think it’s a very risky proposition,” Allaire said.
Circle CEO has called for safe harbors in proposed legislation like the CLARITY Act to clarify stablecoin issuers’ responsibilities in such scenarios. The company faced earlier criticism for freezing unrelated wallets in other matters.
CRCL Stock Price Falls
Circle’s CRCL stock price has tumbled following the Drift protocol hack, putting downward pressure on the stock. On Thursday, CRCL stock price closed 1.84% higher at $107.46 as Circle CEO sees opportunity for yuan-backed stablecoin.
However, CRCL stock price fell 1.42% in after-market hours as the lawsuit surfaced in the media. The stock recorded an intraday low and high of $101.75 and $108.02, respectively. Trading volume dropped below the average volume of 12 million.
The stock has jumped over 22% this week, reducing the monthly loss to 18%. Circle stock has rallied almost 28% YTD. Compass Point cut CRCL stock price target from $79 to $77, downgrading from neutral to sell amid insider selling by company directors.
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