ZachXBT Reports $12.6M in Zama cUSDC Frozen After Circle Blacklists Ethereum Address

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• Approximately $12.6 million in Zama confidential USDC (cUSDC) was frozen after Circle reportedly blacklisted an Ethereum address.
• ZachXBT disclosed that the freeze occurred around seven hours before his public update on May 30.
• Zama said the freeze was linked to Overnight Finance hack funds, prompting a temporary pause of cUSDC, cUSDT, and cWETH.
• The affected address recently participated in an Overnight Finance governance vote related to treasury allocation.
• ZachXBT said the Zama team appeared to receive no prior notice before the blacklist action was executed.
• The development comes amid an ongoing civil lawsuit involving Overnight Finance and plaintiff Patagon Management.

Circle Blacklists Address Holding $12.6 Million in Zama cUSDC

Blockchain investigator ZachXBT reported on May 30 that Circle may have blacklisted an Ethereum contract address associated with privacy-focused protocol Zama’s confidential USDC (cUSDC), resulting in the freezing of approximately 12,606,386.10 USDC.

According to information shared by ZachXBT, the following contract address was frozen at approximately 01:08:11 UTC on May 30, 2026.

Address: 0xe978f22157048e5db8e5d07971376e86671672b2

The reported blacklist action effectively immobilized more than $12.6 million worth of USDC held by the contract. Circle-issued USDC includes blacklist functionality that allows specific addresses to be frozen under certain circumstances, preventing the movement of funds.

ZachXBT stated that the blacklist action appeared to have occurred roughly seven hours before his disclosure, making the development a significant and recent event affecting users of Zama’s confidential stablecoin infrastructure. On March 24, Circle froze 16 active USDC business wallets in connection with a U.S. civil court case, restricting access to funds across multiple addresses.

Zama Founder Issues Clarification Following Freeze

Zama founder Rand Hindi said, “Thanks to zachxbt, we found the root cause and will be taking the appropriate actions to unblock the situation. Tldr; this has nothing to do with Zama, or privacy.”

Latest Update (10:37 UTC): After the initial reports of the freeze, Zama founder Rand Hindi stated at 10:37 UTC that the incident was not related to Zama’s privacy technology or confidential assets. According to the update, the freeze stemmed from an address linked to the Overnight Finance hack that had previously deposited more than $12.5 million USDC into Zama’s confidential USDC (cUSDC) wrapper contract. The address was reportedly not sanctioned or flagged by Know Your Transaction (KYT) systems at the time of the deposit, but a court-issued restraining order on wallets associated with the hacker was issued the previous night.

Hindi said the court order sought to freeze the cUSDC wrapper contract because more than 99% of the assets held in the contract originated from the disputed deposit. He added that Zama was not notified in advance and emphasized that the action was “not against Zama, or against privacy.”

Hindi noted that transactions linked to the address below remain traceable, arguing that Zama does not hide sender or recipient addresses.

Address: 0xf7Fcc767dE537953b3519D4b3097A24A6dFE1c84

As a precautionary measure, the protocol has temporarily paused its cUSDC, cUSDT, and cWETH contracts while it investigates the matter, identifies all addresses connected to the case, and works with relevant parties to resolve the situation. The founder said a detailed post-mortem and future compliance procedures will be shared after the review is completed.

Governance Activity and Overnight Finance Connection

Further analysis cited by ZachXBT indicated that the frozen address had recently participated in an Overnight Finance governance vote concerning treasury allocation decisions.

The governance activity has drawn additional attention because some users had previously accused the Overnight Finance team of conducting a rug pull. No new allegations were presented as part of the blacklist disclosure, but the historical accusations have contributed to scrutiny surrounding entities connected to the address.

The frozen contract’s participation in governance processes became a focal point after the blacklist action was identified, raising questions about the circumstances that led to the address being targeted.

Legal Dispute Adds Context to Freeze

ZachXBT also pointed to ongoing litigation involving Overnight Finance. According to his assessment, one of the plaintiffs in a civil lawsuit against the protocol is Patagon Management, an entity he described as being known for hostile DAO takeover attempts and efforts targeting protocol residual value.

ZachXBT alleged that the plaintiff may have misrepresented the relationship between the frozen address and the Zama contract during legal proceedings. ZachXBT additionally noted that the Zama team appeared not to have received advance notice before the blacklist action was carried out.

The reported freeze places more than $12.6 million in cUSDC under restriction while attention remains focused on the legal and governance-related developments connected to Overnight Finance and the affected Ethereum address.

Zama Outlines Next Steps Following cUSDC Freeze

The latest developments indicate that the freeze was linked to a court-ordered action targeting funds associated with the Overnight Finance hack rather than Zama’s privacy infrastructure. While Circle’s blacklist action temporarily affected more than $12.6 million in cUSDC, Zama has paused its confidential asset contracts and is working with relevant parties to resolve the situation. The protocol said it will publish a detailed post-mortem and outline future procedures for handling similar legal and compliance requests.