Circle freezes $12.6M in USDC linked to Zama contract

Stablecoin issuer Circle froze $12.6 million in USDC connected to Zama’s confidential USDC smart contract on Saturday. On-chain researcher ZachXBT reports the freeze occurred without prior notice to Zama and followed a $12.4 million deposit into the contract on May 11, 2026 by wallets linked to Overnight Finance.

Zama operates a confidential USDC smart contract intended to provide privacy-preserving transactions. The contract is publicly labeled on block explorers and appears in Zama’s technical documentation, which ZachXBT says made the affected addresses identifiable.

ZachXBT wrote that “Overnight Finance held a governance vote recently to distribute treasury funds after holders alleged the team was rug-pulling. Regardless, it’s precedent-setting to unilaterally freeze the contracts or addresses of a protocol where funds have been commingled with Zama users.” He added that, to his knowledge, Zama’s team was not notified before the freeze.

Circle, as issuer of USDC, has technical ability to freeze tokens and has used that power in prior cases. ZachXBT has previously highlighted instances where Circle froze wallets tied to casinos and exchanges in connection with U.S. civil cases, and compiled a list alleging the company failed to freeze roughly $420 million across about 15 incidents since 2022.

One example noted by the researcher involves the April 2026 Drift Protocol hack, in which about $232 million moved through Circle’s Cross-Chain Transfer Protocol; users later filed a class action related to those transfers.

Requests for comment to Circle were not returned by publication. Zama has not publicly indicated it received prior notification of the freeze, according to the on-chain researcher.