Circle freezes $12.6M in Zama USDC contract

A stablecoin issuer has frozen approximately $12.6 million in user funds after blacklisting a privacy-focused smart contract on the Ethereum blockchain. The action, taken on May 30, 2026, targeted Zama’s confidential USDC (cUSDC) contract, preventing all holders from redeeming their tokens.

The freeze was executed by Circle, the issuer of the USDC stablecoin, which maintains a built-in blacklist function in its smart contract. According to on-chain investigator ZachXBT, the action appears linked to a deposit of roughly $12.4 million USDC made into the Zama contract on May 11. The depositing wallet has been associated with Overnight Finance, a decentralized finance platform whose community recently voted to distribute its treasury amid allegations of a potential "rug pull" by its team.

Zama’s co-founder and CEO, Rand Hindi, stated that the protocol itself was not the target. He explained that Circle’s compliance systems flagged the external depositor’s wallet. Because those funds were held within the broader cUSDC contract, a standard holding freeze was applied to the entire contract address, locking all user assets. Hindi characterized the situation as "collateral damage" from a...