Analyst Defends Circle’s No-Freeze Stance on $280M Drift Hack Funds

A unilateral freeze by Circle can create a domino effect across DEXs, bridges, oracles, and even wallets.

The bad press facing stablecoin issuer Circle, following a $280 million exploit on the Solana trading protocol Drift, has increased after a California-based legal group filed a class action lawsuit against it, alleging that it stood by as North Korea-linked hackers moved millions of stolen USDC across the company’s private bridge, making it liable for investor losses from the attack.

However, an analyst has just explained that Circle’s laissez-faire approach was not negligence but rather the only way it could maintain the basic principles that make USDC viable for institutional use.

Why would freezing the funds be worse?

In response to the outcry targeting Circle and its CEO, Jeremy Allaire, Lorenzo Valente, Research Director at ARK Invest, said: He claimed Had the company frozen the stolen USDC without a legal order, the stablecoin would have become “whatever Circle feels like that day.”

According to him, there are several reasons why Circle’s inaction is the more correct course of action, the first being that the incident was “market/oracle exploitation” and not outright theft. This meant that it occupied a gray area involving aggressive but legal trading strategies, and in his view, Circle determining which trades crossed the line could create a system with “no lawyers, no hearing, no appeal, just Circle’s feelings.”

Valente also warned of contagion effects, where if stablecoin issuers freeze funds based on their own judgment, the permissions structure will spread across the entire pool and see bridges reflecting transfers, routers blacklisted by DEXs, wallets blocking transactions, and oracles modifying price feeds at will.

“The whole point of unauthorized financing is so that none of these actors can play judge,” he wrote.

Third, the analyst explained that due process acts as a feature of the product rather than a limitation. “The reason institutions rely on USDC is because Circle can’t wake up and drain your balance,” he said, suggesting that a stablecoin that can succumb to social media pressure can then easily influence the business through any loud enough voice.

There is also a legal risk that the analyst feels no one wants to discuss. Hackers move money quickly. Within minutes, innocent liquidity providers and market makers end up holding the tokens that passed through a mixer or bridge. If they freeze too hard, platforms like Circle could end up doing what could constitute theft from people who have nothing to do with the original crime. In this way, they risk facing lawsuits from downstream counterparties.

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Finally, Valente decried the lack of consistency, calling out popular on-chain detective ZachXBT, who he said… Gone yet Spin on multiple occasions to freeze wallets without explanation, including over 16 business-related addresses just days before the Drift incident. And now the same critic He wants Circle for faster freezing.

“You can’t have it both ways,” the ARK researcher wrote. “Either the department is using broad discretion (and you can’t complain when they freeze something you like), or they are only acting under a lawful order.”

The lawsuit was against Circle foot Written by Gibbs Mora, with Jacob Robinson, legal commentator on X, Contact Their allegations are “dangerous and precedent-setting.” One claim is that Circle aided and encouraged hackers simply by allowing them to use the cross-chain transfer protocol. The other reason is that the Department has a positive duty to acknowledge the damage and freeze the assets.

Robinson doubts the lawsuit will succeed, but noted that if it succeeds, the risk could extend to anyone operating the bridge.

Drift moves with the rope

While Circle defends its choices in court and on social media, Drift Protocol isn’t waiting. Project Announce Collaboration with Tether totaling about $150 million. The plan focuses on a relaunch where USDT replaces USDC in settlements.

A $100 million revenue-linked credit facility, ecosystem grants, and loans to market makers will fund the recovery pool for affected users.

However, Circle’s Allaire had already done just that placed The company’s position during a press conference on April 13 in Seoul. He said it only moves when the law requires it. A company cannot move away from legal obligations to make decisions, even when the ethical calculations seem clear.