Circle, the issuer of the USDC stablecoin, has frozen two Solana wallets containing a staggering $57 million in USDC. This move comes directly in response to a U.S. federal court order, as the Southern District of New York granted a temporary restraining order amid a high-profile class-action lawsuit targeting the controversial LIBRA token and its backers.

A Legal Earthquake for Memecoins

The freeze, executed on May 28, 2025, marks one of the largest court-ordered asset freezes in the history of the memecoin sector. On-chain data confirms that two Solana wallets, one holding $44.59 million and another with $13 million, were locked by Circle’s Multisig Freeze Authority, effectively cutting off access to the funds at 3:15 am and 3:18 am UTC. The legal action underscores the growing scrutiny and regulatory pressure facing the crypto industry, especially projects operating in the loosely regulated memecoin space.

The LIBRA Scandal

LIBRA’s meteoric rise began in February, when Argentine President Javier Milei posted on social media, touting the token as a catalyst for economic innovation in Argentina. The endorsement sent LIBRA’s value soaring, with its market cap briefly topping $4 billion. However, the euphoria was short-lived. Within hours, LIBRA’s price crashed by 94%, wiping out billions in market value and leaving thousands of retail investors at a loss.

Investigations quickly revealed troubling details. Plaintiffs in the class-action suit allege that Kelsier Ventures, KIP Protocol, and Meteora along with their founders engineered a “predatory” liquidity pool that allowed insiders to siphon off over $100 million, while regular investors bore the brunt of the losses. Blockchain analytics confirmed that more than 85% of the token supply was retained by insiders at launch, fueling suspicions of a classic pump-and-dump scheme.

Circle’s Freeze

Circle’s compliance with the court order has reignited debate over the centralization of stablecoins. While USDC is marketed as a transparent and regulatory-friendly digital dollar, the ability of Circle to unilaterally freeze assets highlights the centralized control embedded in its design. Crypto advocates are divided: some praise the move as a necessary step to protect investors and uphold the law, while others warn that such intervention undermines the very ethos of decentralization that cryptocurrencies were built upon.

What Happens Next?

A crucial hearing is scheduled for June 9, when the court will decide whether the frozen assets will remain locked as the lawsuit progresses. The outcome could set a precedent for how courts and regulators handle alleged fraud and investor protection in the fast-evolving world of digital assets.

Meanwhile, the LIBRA saga continues to reverberate far beyond the courtroom. President Milei, while not named as a defendant, faces ongoing political fallout in Argentina, with critics accusing the government of failing to properly investigate the scandal.