Circle Tells Wisconsin Court: The Keys Aren’t Ours, So the Coins Aren’t Ours 🔑

Circle Internet Group has asked a Wisconsin court to dismiss a misdemeanor obstruction-of-justice complaint, arguing that it cannot legally or technically invalidate roughly 381,000 frozen USDC tied to an alleged romance-investment scam because the tokens sit in third-party wallets whose private keys the issuer does not control. The filing escalates a dispute over how much responsibility regulated stablecoin issuers bear for returning stolen funds once assets leave their custody.

According to the Walworth County criminal complaint, a county resident received an unsolicited text in May 2025 from a person identifying herself as “Lenora” and transferred savings into USDC on a fake investment platform. A Walworth County court ordered Circle to freeze the tokens in August 2025, and Circle complied by blocklisting the wallet. In December, a judge ordered the firm to invalidate those tokens and reissue an equal amount to the sheriff’s office; Circle refused, prompting prosecutors in April 2026 to charge the $17 billion issuer with a misdemeanor count of obstruction of justice. Walworth County prosecutor Thomas Binger told reporters, “The tools that are at our disposal are not keeping up with the tools the criminals are using.” Milwaukee County detective Scott Simons said Circle declined freeze requests or orders arrived too late in over a dozen cases.

In its motion to dismiss, Circle argues that the initial warrant only required blocklisting the address, which it executed immediately, while the second warrant demands technically impossible steps because the company does not hold the private keys to the destination wallet. Circle also contends the Wisconsin court lacked personal and subject-matter jurisdiction, since both the company and the property at issue were located outside the state, and that the complaint omitted repeated communications explaining USDC’s technical limits. The filing discloses that Circle has reached a general agreement with the U.S. Department of Justice on a mechanism under which the issuer could voluntarily mint replacement USDC following a final forfeiture order and a permanent blocklisting order.

The case contrasts Circle’s cautious posture with Tether’s discretionary cooperation. Tether, whose USDT is the largest stablecoin, has frozen about $4.7 billion linked to crime and says its “burn and reissue” mechanism has returned $1.1 billion to victims, while its T3 unit with TRON has frozen over $450 million; U.S. prosecutors also seized illicit USDT worth $61 million in a separate case. Circle, which was listed on the New York Stock Exchange in June 2025, freezes USDC only under lawful process, a policy the company says has helped USDC gain ground in Europe under the EU’s Markets in Crypto-Assets (MiCA) rules.

Circle policy chief Dante Disparte wrote in April that “legal frameworks for faster action do not exist” even though the underlying tools do, while Joshua Cooper-Duckett of Cryptoforensic Investigators said Circle could update its token code to permit forced burns. New York prosecutors, in a January letter to U.S. Senators, argued that Circle continues to expand despite unresolved questions about cooperation with law enforcement. The Federal Bureau of Investigation logged a record $11.4 billion in crypto fraud losses for 2025, with more than 18,500 victims losing over $100,000 each. Circle has asked the court to dismiss the complaint or, alternatively, hold an evidentiary hearing on the facts it says were omitted from the original filing.