Hassan Maishera
TL;DR
- Circle is facing a class action lawsuit from Drift Protocol investors over the $280 million exploit on April 1.
- The lawsuit claims Circle failed to freeze the stolen USDC despite having the authority to do so.
Circle Internet Financial is being sued by a group of investors in Drift Protocol following the $280 million exploit on April 1, one of the largest hacks in decentralized finance (DeFi) history.
The class action lawsuit, filed by law firm Gibbs Mura on Tuesday, accuses Circle of failing to freeze the stolen USDC involved in the attack.
Lawsuit Claims Circle Failed to Act on Stolen Funds
The lawsuit alleges that Circle had the technical and contractual authority to freeze the stolen USDC but did not take action promptly.
"Circle allegedly took no action to freeze the funds, despite having the technical and contractual authority to do so," the lawyers stated.
Onchain investigator ZachXBT also criticized Circle for its delay in freezing the stolen funds, noting that the attacker moved over $230 million worth of USDC from Solana to Ethereum via Circle's cross-chain transfer protocol within six hours of the exploit.
Drift Protocol, a Solana-based decentralized exchange, was exploited after an attacker gained unauthorized access to the platform, introduced a malicious asset, and removed withdrawal limits, draining the funds.
The perpetrators, who had posed as a quantitative trading firm for six months, were later revealed by Drift.
Circle CEO Jeremy Allaire defended the company’s decision, explaining that it only freezes USDC wallets at the direction of law enforcement or the courts. He stressed that acting outside of established legal processes could create "a significant moral quandary."
Allaire expressed concerns about the risks of taking unilateral action in private matters. He stated that,
"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."
Drift Secures Recovery Package for Users
In response to the exploit, Drift Protocol announced a recovery package consisting of up to $127.5 million from Tether, along with an additional $20 million from other partners. The recovery structure is designed to support user reimbursements following the exploit and to help Drift relaunch as the largest USDT-based perpetual DEX on Solana.
