Circle Freezes Funds Linked to the LIBRA Token Collapse as Insider Profits Face Scrutiny

Highlights:

• Circle has frozen USDC linked to LIBRA wallets after a court issued a restraining order.
• The LIBRA token collapsed after insiders sold 70% of the supply, causing huge losses to investors.
• The USDC freeze shows stablecoins can be controlled when legal action is taken against suspected fraud.

Circle has frozen nearly $58 million in USDC held in two Solana wallets linked to the LIBRA meme coin team. Blockchain data confirmed that the wallets contained $44.59 million and $13.06 million in USDC. Circle executed the freeze using its multisig authority. The decision was preceded by a temporary restraining order from the federal court in the Southern District of New York.

ALERT: $57M OF USDC ASSOCIATED WITH LIBRA FROZEN BY CIRCLE

Two Libra accounts have just been frozen by Circle, including the Libra deployer wallet.

These accounts contained a combined $57M in USDC which is now immobile. pic.twitter.com/HpmaM5HwVJ

— Arkham (@arkham) May 28, 2025

Burwick Law admitted it had filed a request for the restraining order. According to Max Burwick, the order put forward by Tim Treanor was designed to freeze the funds as the case was being reviewed by the court. The court scheduled a hearing for June 9 to consider a preliminary injunction. If granted, the freeze will remain in place for the duration of the litigation. Circle has not released a public explanation for the freeze, but sources suggest it followed a legal request tied to investor losses.

LIBRA Token Collapse Leads to Lawsuit and Political Fallout

The LIBRA token was launched in February and became instantly popular when Argentine President Javier Milei posted about it online. In one hour, the price jumped from a few cents to more than $5, making the market cap higher than $4 billion. The value of the token dropped fast once insiders sold 70% of the tokens. As a result, the coin lost over 90% of its value, causing investors to lose more than $250 million. Insiders reportedly made about $150 million from selling their tokens.

Hundreds of investors filed a class-action lawsuit in March, accusing the team of fraud and manipulation. The lawsuit names Kelsier Ventures and its co-founders as primary defendants. It also lists alleged promoters such as Benjamin Chow of Meteora and Julian Peh of KIP Protocol. The plaintiffs contend that these parties misinformed the buyers and used pump-and-dump tactics. Following his decision to stop endorsing the project, President Milei distanced himself from it and stopped the investigation by the government task force.

Despite the accusations, the team behind LIBRA has not been accused of hacking or theft. Commentators pointed out that buyers purchased tokens voluntarily and the promoters did not force them into the scheme. However, the freeze shows that asset issuers can take action when there is suspicion of unlawful activity. Circle’s decision signals growing legal pressure on projects that may mislead the public or harm investors financially.

Stablecoin Controls Highlight Legal Risks in Crypto Industry

The use of a freeze order has reopened discussions about just how much authority centralized issuers have over blockchain assets. Though crypto users want decentralization, issuers like Circle can freeze funds if needed. USDC has become popular for being stable, though its use is controlled by the issuer. Freezing funds due to court action between parties proves that stablecoins follow the same compliance rules as traditional currencies.

The freeze follows similar actions in the past involving major hacks and legal cases. Recently, Tether froze $27 million worth of USDT linked to Garantex, a Russian cryptocurrency exchange that is facing sanctions.