Circle is facing legal pressure in Wisconsin after prosecutors accused the crypto firm of refusing to follow a warrant tied to stolen $USDC. The dispute comes as authorities report rising difficulty recovering funds moved through cryptocurrency scams.
According to a report, authorities in two states said Circle had not followed court orders aimed at returning stolen assets. The Wisconsin case has drawn attention because prosecutors filed a criminal complaint against the company.
The complaint includes one misdemeanor count. Karen Greenway, a former FBI agent and financial crime expert, said such a charge against a major financial firm is highly unusual.
Circle Rejects Wisconsin Crypto Scam Complaint
Circle rejected the Wisconsin complaint in a court filing last week. The company called the case meritless and asked the court to dismiss it.
Circle said it lacked the technical ability to comply with the order. The firm also argued that prosecutors did not engage with its efforts to find other ways to compensate the victim.
Circle further said the Wisconsin court lacked jurisdiction. Prosecutors, however, said the case shows how crypto scams are straining law enforcement tools.
Thomas Binger, the prosecutor in the case, said criminals use cryptocurrency’s anonymity to move illicit funds beyond reach. He said investigators are struggling because their tools are not keeping pace with criminal methods.
The Wisconsin case dates back to around May 2025. According to court records, a Walworth County resident identified as “Victim #1” received an unsolicited text from a person calling herself Lenora.
Court records said Lenora led the man to believe they were in a relationship. She later directed him to convert part of his savings into $USDC and deposit it into a fake investment platform.
Circle Faces Scrutiny Over Frozen $USDC Repayment
In August, a Walworth County court ordered Circle to freeze about 381,000 stolen $USDC. The tokens had already been transferred to a private crypto wallet.Circle complied with that freeze order. The dispute escalated in December after a judge signed a warrant ordering the company to “facilitate the seizure” of the funds.
The warrant directed Circle to invalidate the frozen tokens. The order also required Circle to send matching new $USDC to a wallet controlled by the Walworth County Sheriff’s Office.
Circle denied that it could carry out that step. Prosecutors then filed the complaint, alleging that the company intentionally disobeyed, resisted, or obstructed the court.
New York prosecutors raised similar concerns in a January letter to U.S. senators. They said Circle had denied law enforcement requests to freeze $USDC without a court order.
However, Circle has said it freezes tokens only through lawful process. The company said that policy protects users from arbitrary or politically motivated interference.
New York officials also accused Circle of not honoring court orders seeking the return of stolen funds. They argued that frozen assets may remain profitable because Circle holds interest-yielding assets backing its tokens.
The letter said Circle had at least 119 million $USDC tokens frozen, citing blockchain researcher Yury Serov. Circle has denied wrongdoing in the Wisconsin case.
Circle said in a Wisconsin court footnote that it had reached a general agreement with federal prosecutors on a victim compensation mechanism. Under that process, certain $USDC funds could be permanently frozen and replaced with new tokens of equal value.
Singapore Stops $2.9M in Crypto Scam Losses
The wider challenge extends beyond the United States. Singapore police said their Anti-Scam Centre and Cyber Investigation Branch prevented more than $2.9 million in possible losses during a June 2026 crypto scam operation.
The operation ran from June 1 to June 30. Police worked with Coinbase, Coinhako, Gemini, Independent Reserve, OKX, StraitsX, and Upbit.
Officers used blockchain tools from Chainalysis and TRM Labs. They identified more than 130 victims across government official impersonation scams, investment scams, and job scams.
Singapore police also shared blockchain intelligence with foreign agencies. Those partners included the FBI and the Cybercrime Squad of the New South Wales Police Force.
Officials said the operation showed the value of public-private cooperation. Police said they would continue working with exchanges, foreign law enforcement agencies, and other stakeholders to combat cybercrime.
Authorities also advised the public to use security tools such as ScamShield and two-factor authentication. They urged users to set transaction limits, check warning signs, and verify requests for money or personal information.
Related: Circle and Nomura to Launch $USDC Digital Asset Settlement Service in Japan by 2027
