Circle blacklisted a publicly labeled Ethereum smart contract tied to Zama's privacy protocol on Saturday, freezing approximately $12.6 million in USDC. The move came on the heels of a U.S. federal court order connected to a civil lawsuit against Overnight Finance founder Maxim Ermilov. The frozen address — 0xe978F22157048E5DB8E5d07971376e86671672B2 — is now on Circle's blacklist, meaning the USDC held there cannot be moved or redeemed.
What the frozen contract is
The address is a smart contract associated with Zama, a privacy-focused protocol that works with Ethereum. Zama builds cryptographic tools that let developers run computations on encrypted data. Circle publicly labeled the contract before freezing it, a step the issuer sometimes takes when it receives a legal order. The $12.6 million in USDC is now effectively trapped inside the contract, unavailable to anyone holding tokens there.
The court order behind the freeze
Circle said the blacklist followed a federal court order tied to a civil lawsuit against Maxim Ermilov, the founder of Overnight Finance. The details of the lawsuit are not fully public, but the order compelled Circle to freeze assets at that specific address. This isn't the first time Circle has acted on a court order against a DeFi-related address, but the size of the freeze — over twelve and a half million dollars — makes it one of the larger ones this year.
What this means for DeFi's reliance on USDC
The freeze raises a question that keeps coming back: how safe is USDC as a settlement layer in DeFi when Circle can freeze funds on demand? The protocol that controlled the contract, Zama, didn't choose to freeze the money — Circle did, following a judge's order. For users who put USDC into privacy protocols or other smart contracts, the event is a reminder that the issuer can cut off access with a single court filing. The timing isn't great for Circle, which has been pushing USDC deeper into DeFi lending and payments. A freeze like this — especially on a privacy protocol — tends to spook users who thought their crypto was beyond the reach of legal orders.
What happens next is unclear. The lawsuit against Ermilov is ongoing, and the frozen USDC will sit until a court decides otherwise. For now, the $12.6 million is locked, and the question of whether DeFi can truly work with a stablecoin that answers to a court remains unanswered.
