Circle froze a Zama-linked cUSDC contract after an In a single day Finance hacker pockets deposited over $12.5M USDC.
A Circle compliance freeze has affected a Zama-linked confidential USDC wrapper contract after funds tied to the In a single day Finance hack entered the contract.
The freeze trapped person funds as a result of greater than 99% of the cUSDC contract stability got here from one flagged depositor.
Zama stated the motion was not a sanction in opposition to its protocol or privateness instruments.
Circle Freeze Hits Zama-Linked cUSDC Contract
Zama stated the problem began after an tackle linked to the In a single day Finance hack deposited about $12.5 million USDC.
The funds entered its confidential USDC wrapper contract earlier than the tackle was flagged.
The corporate stated the pockets was not on any sanctions listing on the time of deposit. It additionally stated its Know Your Transaction instruments didn’t flag the tackle then.
Because of @zachxbt, we discovered the basis trigger and will likely be taking the suitable actions to unblock the scenario. Tldr; this has nothing to do with Zama, or privateness.
The problem stems from an tackle associated to the In a single day Finance hack, which deposited over ~$12.5m USDC into our… https://t.co/PThaUVEwAH
— Rand (@randhindi) Might 30, 2026
A courtroom order later positioned a restraining order on a number of wallets linked to the hacker.
As a result of the pockets held funds contained in the cUSDC contract, Circle’s compliance system froze the contract.
Zama stated the freeze affected the entire wrapper contract, not solely the flagged pockets. Consequently, funds from different customers had been additionally trapped in the course of the motion.
Zama Says Freeze Is Not A Sanction In opposition to Privateness
Zama stated the freeze was not aimed on the protocol itself. It additionally stated the motion was not in opposition to privateness or confidential finance instruments.
“The sanction was not in opposition to Zama, or in opposition to privateness,” the assertion stated. Zama described the occasion as a normal restraining order utilized in DeFi circumstances.
Circle’s compliance system flagged an exterior depositor’s pockets. As a result of that pockets held funds within the cUSDC contract, your complete contract was swept into a normal holding freeze.
That is collateral harm, not a sanction in opposition to the Zama Protocol.
Our authorized staff is already… https://t.co/z9wWyenl91
— Zama (@zama) Might 30, 2026
The corporate stated the cUSDC wrapper had restricted use earlier than the freeze. That left a lot of the contract stability tied to 1 giant deposit from the suspected hacker.
Zama stated this made the contract the goal of the freeze request. It added that it ought to have been notified earlier so it may act on its facet.
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Consumer Funds Trapped As Contracts Are Paused
Zama stated it should pause its cUSDC, cUSDT, and cWETH contracts in the course of the overview.
The pause will stay whereas it investigates addresses linked to the case. The corporate stated it’s working with events concerned to resolve the matter.
Its authorized staff can also be engaged to isolate the flagged tackle. Zama stated the purpose is to revive entry for unaffected contributors.
It described the occasion as collateral harm from a compliance freeze. The corporate additionally stated it doesn’t help criminal activity on its protocol.
“We is not going to tolerate any illicit habits in our protocol,” the assertion stated.
Zama rejected claims that its system can work like a mixer. It stated the protocol doesn’t cover senders or recipients.
In accordance with Zama, its system solely retains balances and quantities confidential. It stated transaction paths can nonetheless be reviewed on public block explorers.
The corporate credited blockchain investigator ZachXBT for serving to determine the basis trigger. It stated this allowed the staff to grasp why the freeze occurred.
Zama stated it should publish a full autopsy after the overview. The report will cowl the way it plans to deal with comparable authorized requests sooner or later.