Circle hit with class action lawsuit over alleged inaction in $280 million Drift exploit

Circle is facing a class action lawsuit from a group of Drift Protocol investors who lost money in the $280 million exploit on April 1, one of the largest hacks in DeFi history.

The lawsuit, filed Tuesday by law firm Gibbs Mura, accused Circle Internet Financial of failing to act swiftly to freeze the stolen USDC (USDC) tied to the attack.

"Circle allegedly took no action to freeze the funds, despite having the technical and contractual authority to do so," the lawyers said in a statement on Wednesday.

The incident gained more traction after Drift revealed the perpetrators had spent six months posing as a quantitative trading firm.

The lawsuit further alleged that, nine days earlier, Circle had frozen 16 unrelated wallets in a separate civil case, "demonstrating both the capability and willingness to act."

Moral quandary

In a press conference earlier this week, Circle CEO Jeremy Allaire defended the company's decision, saying that the company only freezes USDC wallets at the direction of law enforcement or the courts. Allaire added that taking action outside established legal processes in private matters could become a "significant moral quandary."

"If there are others that believe that Circle should just step away from what the law says and do its own, make its own decisions, I think it's a very risky proposition," Allaire said.

The Block has reached out to Circle for comment on the class action lawsuit.

Meanwhile, Drift said Thursday that it has secured a proposed recovery package of up to $127.5 million from Tether and $20 million from other partners. 

"The structure is intended to support user recovery following the April 1 exploit and facilitate Drift’s relaunch as the largest USDT-based perpetual DEX on Solana," said the Drift team.