Circle Blacklists Zama Protocol Address, Freezing $12.6M In User Funds – Details
Stablecoin issuer Circle has reportedly blacklisted a sensible contract linked to privateness protocol Zama, freezing roughly $12.6 million in consumer funds. The improvement, first flagged by on-chain investigator ZachXBT, includes the protocol’s Confidential USDC (cUSDC) contract deployed on Ethereum seven hours earlier than ban. The affected contract tackle had been publicly documented in Zama’s docs and visual on blockchain explorers, making the freeze each traceable and verifiable in actual time.
Zama’s Frozen Funds Draw Relationship To Overnight Finance And Legal Dispute
According to additional findings by ZachXBT, the freeze could also be not directly tied to current controversy and authorized points surrounding the asset-management and yield-generating protocol Overnight Finance.
Data reveals that pockets tackle 0xf7fcc deposited roughly $12.4 million in USDC into the Zama contract on May 11, 2026. This pockets seems to be related to Overnight Finance, which has lately been embroiled in governance tensions. Notably, token holders had alleged a doable rug pull by the event workforce. This resulted in a governance vote on the DeFi protocol to distribute its treasury property.
ZachXBT shared further info suggesting that Overnight Finance can also be dealing with a civil case in court docket. One of the plaintiffs within the protocol case is Patagon Management, a agency identified within the DeFi house for participating in aggressive governance methods, akin to hostile DAO takeovers/RFV raiding. While no direct causal hyperlink has been confirmed between Circle actions and these occasions, the overlap between authorized proceedings, treasury actions, and the frozen funds has raised considerations about how interconnected DeFi protocols can expose unrelated customers, i.e., Zama customers on this case, to exterior dangers.
Circle’s Unilateral Action Sets Unwanted Precedent
Circle’s freeze has additionally reignited criticism of transparency practices by centralized issuers. According to ZachXBT, the Zama workforce seems to have obtained no prior discover earlier than the cUSDC contract was blacklisted. If confirmed, this may amplify rising considerations about unilateral enforcement actions affecting decentralized functions and their customers with out warning.
Earlier in March 2026, Circle reportedly froze over 16 sizzling wallets related to varied entities with out publicly explaining its rationale. The newest motion, nevertheless, goes a step additional by focusing on a protocol-level contract the place consumer funds are pooled, moderately than remoted wallets. This distinction is important as a result of it raises questions on custodial threat in supposedly decentralized techniques.
At the time of reporting, Circle has not issued an official clarification for its unilateral motion in freezing Zama’s cUSDC contract.
Featured picture from Shutterstock, chart from Tradingview
