Circle blacklisted the smart-contract address behind Zama's confidential USDC token on Friday, locking roughly $12.6 million of stablecoins inside a privacy protocol that is not itself the target of any litigation.
The freeze hit Zama's cUSDC wrapper, an ERC-1967 proxy that pools USDC on behalf of holders who use the protocol's fully homomorphic encryption to mask balances on Ethereum. On-chain investigator ZachXBT pegged the trapped balance at 12,606,386.10 USDC and said the block landed at 01:08 UTC on May 30. Circle has not publicly explained the action.
The action is the largest-dollar instance to date of a familiar DeFi problem: a stablecoin issuer's centralized blacklist reaching through a composed contract and locking innocent users alongside one targeted depositor. Zama, which raised a Series B last year for its confidential-blockchain stack, is the first named DeFi protocol caught in that crossfire on this scale.
The trigger was a civil dispute over Overnight Finance, an OVN-token DeFi protocol whose holders have alleged the team was preparing to drain the treasury and recently voted on Snapshot to distribute funds. Plaintiffs in the underlying litigation are seeking damages against Overnight Finance founder Maxim Ermilov; ZachXBT has named Delaware-based Patagon Management, a firm with a history of suing DAO projects, as one of the plaintiffs.
