Circle blacklisted the Ethereum contract behind Zama’s confidential USDC, or cUSDC, on May 30, 2026, at 01:08 UTC. The action froze a pooled wrapper that held all depositor funds in one shared contract. On-chain investigator ZachXBT traced the frozen balance to 12,606,386 USDC. Circle has not issued a public statement.
The blacklist came after a temporary restraining order issued on 29 May 2026 by U.S. District Judge P. Casey Pitts. The case, Newton AC/DC Fund LP et al. v. Maxim Ermilov et al., was filed on 28 May in the Northern District of California. The order came ex parte, so Ermilov had not yet been heard. The June 1 hearing gives both sides a chance to present arguments.
Zama said it received no advance notice from Circle or the court before the blacklist. The company also paused its cUSDC, cUSDT and cWETH wrapper contracts as a precaution. What happens when a pooled privacy wrapper faces a blacklist that targets one disputed deposit?
The TRO followed allegations that Maxim Ermilov moved more than $15.77 million from Overnight Finance’s treasury on 11 May 2026. Plaintiffs said the move came just before an OVN holder vote to liquidate and distribute funds. They also said a wallet linked to those funds deposited $12.4 million USDC into Zama’s cUSDC contract that same day.
That deposit made up more than 99% of the frozen pool. Ermilov disputed the allegations and said the wallets held personal and team funds. The dispute now sits at the center of the court process and the on-chain freeze.
The cUSDC contract uses fully homomorphic encryption, or FHE, to mask USDC balances on Ethereum. Since the assets sit in a shared contract, the blacklist locked every depositor’s funds together with the disputed amount. Circle’s action therefore affected the entire pool, not only the targeted address.
Zama said the contract had been publicly deployed for 154 days before the blacklist. It also said the depositing wallet showed no sanctions flags or know-your-transaction alerts at the time of deposit. The company said its legal team is now working to isolate the flagged deposit.
That effort aims to restore access for users not tied to the Overnight Finance dispute. Until then, the paused wrappers remain part of the fallout from the blacklist. The event also places pooled confidential token designs under sharper scrutiny.
Circle’s role extends beyond this single contract. USDC serves as a settlement and collateral asset across crypto markets, including DeFi venues and centralized exchanges. Circle sits in that flow as a core infrastructure provider.
Read More: Circle’s $250M USDC Mint on Solana Signals Fresh Liquidity Shift
The report also links Circle to the wider flow of USDC across platforms such as Hyperliquid and Coinbase. In that arrangement, Hyperliquid captures up to 90% of the yield on USDC deposits, while Coinbase acts as a treasury deployer. Circle supplies the cross-chain infrastructure that moves USDC between networks.
That structure frames Circle as a service layer inside digital asset markets. It also places NYSE: CRCL in the middle of activity that connects a major centralized exchange, Coinbase and a DeFi venue, Hyperliquid. The company’s role now spans payment rails, collateral use and cross-chain movement.
The broader narrative around Circle also includes possible access to Federal Reserve payment rails and an upcoming appearance at the Bernstein Strategic Decisions Conference. These developments sit alongside the cUSDC freeze and the court case in California.
Circle blacklisted Zama’s cUSDC contract following a U.S. court temporary restraining order linked to the Overnight Finance case. The move froze over 12.6 million USDC in a pooled Ethereum wrapper, affecting all depositors. The dispute continues in court, with hearings set to determine how the funds will be handled.