‘Most Incompetent Freeze:’ ZachXBT Slams Circle as Wallet Ban Begins to Unravel

Stablecoin issuer Circle has unfrozen the USDC balance in one of the 16 wallets it targeted in a controversial enforcement move earlier this week, according to ZachXBT.

In the latest update, the on-chain investigator identified the address “0x61f…e543,” linked to Goated.com, as having regained access to its funds. The wallet currently holds around 130,966 USDC, based on data from Arkham. He added that other affected wallets could also be restored in the near term.

From Freeze to Backtrack

The development follows Circle’s decision to freeze USDC balances across 16 hot wallets reportedly associated with unrelated businesses. As per  ZachXBT, at least one impacted entity indicated the action was tied to a sealed US civil case, though no public information or clear justification was provided on the “overreach.” Following an independent review of on-chain activity, he found that the wallets appeared operational, with no indication of illicit behavior.

The partial reversal has intensified scrutiny of Circle’s handling of the situation, particularly given the lack of transparency surrounding the legal basis for the freeze. ZachXBT tweeted,

“In my 5+ years of investigations, it could potentially be the single most incompetent freeze I have seen. This is what happens when you outsource your freezing decisions to literally any random federal judge instead of having a process.”

Transparency Concerns Intensify

Several market commentators slammed the move while arguing that such actions, when taken without clear evidence, risk disrupting legitimate business activity. One said that unfreezing a single wallet does little to change the bigger picture.

Meanwhile, MetaMask security researcher Taylor Monahan stressed that freezing user funds demands thorough investigative work and accountability. Monahan sharply criticized Circle’s approach to freezing funds, and said that the process has long relied on court authorization rather than independent technical verification.

She noted that if a US federal court approves a freeze request, the stablecoin company typically enforces it, even in cases where the details remain unclear or contested.

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