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Zama

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<h2 id="b-tldr-b">TLDR:</h2>
<ul>
 <li>A federal judge ordered Circle to blacklist Zama’s cUSDC contract, freezing roughly $12.6 million in pooled USDC funds.</li>
</ul>
<ul>
 <li>Plaintiffs allege Overnight Finance’s Ermilov moved $15.77M from a shared treasury just before an OVN holder vote passed.</li>
</ul>
<ul>
 <li>Zama’s entire cUSDC pool was frozen because the contract holds funds from all depositors, not just the disputed address.</li>
</ul>
<ul>
 <li>Activist firm Patagon Management, known for forcing DAO treasury payouts, is one of the co-plaintiffs driving the suit.</li>
</ul>
A federal court order has led Circle to blacklist Zama’s confidential USDC contract, freezing roughly $12.6 million in funds early Saturday. 
The freeze stems from a class action suit filed against Overnight Finance creator Maxim Ermilov. Plaintiffs allege Ermilov diverted more than $15 million from a shared treasury. 
The move has drawn attention because it swept innocent users’ funds into the dispute.
<h2 id="b-court-order-triggers-freeze-on-zama-s-contract-b">Court Order Triggers Freeze on Zama’s Contract</h2>
Circle blacklisted the cUSDC contract address at 1:08 a.m. UTC on Saturday. The freeze locked 12,606,386 USDC in the Ethereum-based contract. Public block explorers identify the frozen address as Zama’s confidential USDC token.
Zama CEO Rand Hindi <a href="https://twitter.com/randhindi/status/2060645486416085337?s=20" rel="noopener noreferrer nofollow">said on X</a> that his team was investigating the freeze. He later wrote that the contract appeared to have been “caught in a crossfire of another case.” Hindi also confirmed that Circle gave no prior warning before the blacklist was executed.
<div class="embed-x">
 <blockquote class="twitter-tweet">
 We are investigating the cUSDC contract freeze. I will update here as the situation progresses.
 — Rand (@randhindi) <a href="https://x.com/randhindi/status/2060645486416085337?ref_src=twsrc%5Etfw" rel="noopener noreferrer nofollow">May 30, 2026</a>
 </blockquote>
</div>
Because cUSDC wraps the <a href="https://blockonomi.com/circle-payments-network-adds-nium-to-bridge-usdc-settlement-with-global-payouts/" rel="noopener noreferrer nofollow">USDC</a> backing every token holder, blacklisting the contract locks the full pool. The frozen amount is slightly more than the disputed deposit, meaning other users’ funds were also swept in. The plaintiffs told the court they were prepared to advance funds to make unrelated parties whole.
Hindi addressed the scale of outside exposure directly. “<cite>Since there wasn’t much utility yet for the cUSDC wrapper, there were very little funds in it, and as a result the vast majority (&gt;99%) of funds in the cUSDC contract came from that single hacker’s deposit,</cite>” he wrote on X. Zama also announced it would pause the cUSDC, cUSDT, and cWETH contracts during its investigation.
Zama said in a statement that it is “an infrastructure provider, not a mixer or a tumbler.” The firm added that its legal team is working to isolate the flagged address and restore access for affected users as quickly as possible. Hindi also pushed back on any suggestion that the protocol enables <a href="https://parameter.io/singapore-faces-major-money-laundering-risks-from-scams-and-illegal-betting-fatf-reports/" rel="noopener noreferrer nofollow">money laundering. </a>
“<cite>It’s also really useless for hackers to try to use Zama to hide their trail as we are precisely not a mixer and we do not obfuscate the sender and recipient, only balances and amounts,”</cite> he wrote.
<h2 id="b-overnight-finance-treasury-dispute-explained-b">Overnight Finance Treasury Dispute Explained</h2>
The <a href="https://www.courtlistener.com/docket/73408471/newton-acdc-fund-lp-v-ermilov/" rel="noopener noreferrer nofollow">class action was filed on</a> May 28 in the U.S. District Court for the Northern District of California. Three funds holding OVN tokens accuse Ermilov of moving more than $15 million from a shared treasury. The filing describes Ermilov as a Russian national living in Abu Dhabi.
Ermilov built Overnight Finance, a DeFi yield platform that issued the USD+ stablecoin and OVN governance token. 
The project raised $850,000 in a pre-seed round led by Hack VC in February 2022. OVN token sales began in September 2023, with holders promised a pro rata claim on the treasury. 
The complaint quotes a November 6, 2024 Discord message in which Ermilov wrote, “you can buy 51% of OVNs and vote to have [the Treasury] distributed.”
OVN holders initiated a vote on May 4, 2026, to liquidate the treasury and distribute the funds. Just before the vote crossed a majority threshold on May 11, the lawsuit alleges Ermilov moved more than $15.77 million. About $12.5 million of those funds were USDC, and the bulk ended up in Zama’s cUSDC contract.
Ermilov, however, disputed the plaintiffs’ account. “They had no right to vote the way they did,” <a href="https://www.theblock.co/post/403091/court-ordered-circle-freeze-traps-12-6-million-in-zama-cusdc-contract-amid-overnight-finance-suit" rel="noopener noreferrer nofollow">he told The Block.</a> He also argued that the token confers no financial entitlement. 
“OVN is not a security, so no rights to profit or distributions of any nature,” he said. Asked why funds were moved into Zama’s system, he said the move was meant to “hide balances from general public to minimize personal security risks,” citing recent kidnappings of crypto holders.
<h2 id="b-activist-investors-and-a-familiar-legal-strategy-b">Activist Investors and a Familiar Legal Strategy</h2>
The plaintiffs in this case are not ordinary token holders. One co-plaintiff, Patagon Management, has built a practice around pressuring DAOs to liquidate treasuries and return value to <a href="https://moneycheck.com/wlfi-governance-votes-on-usd1-stablecoin-airdrop-to-token-holders/" rel="noopener noreferrer nofollow">token holders. </a>The firm is run by Diogenes Casares, who is associated with a group sometimes called the RFV Raiders. 
Casares has said the broader community has unwound DAOs including Fei Protocol, Rome DAO, and Temple DAO, and shaped governance of others. “Collectively, these protocols have Risk-Free assets in excess of $1B,” he wrote in January 2023.
Patagon previously sued Wei “Max” Wu over Spartacus DAO, a project whose holders had voted to dissolve it and reclaim the treasury. In that case, a judge granted an emergency restraining order barring Wu from moving $35 million in crypto. 
The court also allowed service by NFT, email, and Discord — the same channels the Overnight plaintiffs are now seeking to use on Ermilov.
On May 29, U.S. District Judge P. Casey Pitts issued a text-only order directing <a href="https://coincentral.com/circle-crcl-stock-surge-as-nium-partnership-expands-usdc-global-payout-reach/" rel="noopener noreferrer nofollow">Circle</a> to block the USDC and set a hearing for Monday, June 1. 
The order came on an ex parte motion, meaning Ermilov’s side had not yet been heard. The June 1 hearing will allow both sides to present arguments.
Onchain investigator ZachXBT called the freeze “precedent setting” for blacklisting a contract where funds are pooled with other users. “<cite>Overall I feel bad for Zama users who have now been indirectly impacted with this mess of a US civil case,”</cite> he wrote. 
The case is now set to test the limits of Circle’s freeze authority in private legal disputes involving pooled DeFi contracts.
The post <a href="https://blockonomi.com/circle-freezes-12-6m-in-zamas-cusdc-contract-after-court-order-in-overnight-finance-suit/" rel="noopener noreferrer nofollow">Circle Freezes $12.6M in Zama’s cUSDC Contract After Court Order in Overnight Finance Suit</a> appeared first on <a href="https://blockonomi.com" rel="noopener noreferrer nofollow">Blockonomi</a>.

Circle Freezes $12.6M in Zama’s cUSDC Contract After Court Order in Overnight Finance Suit

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