Its stablecoin source circuit It has reportedly blacklisted a smart contract linked to the privacy protocol comes out, Freezing approximately $12.6 million in user funds. development, It was marked for the first time By an investigator on the chain ZackXBTincludes the protocol’s secret USDC contract (cUSDC) which is published on Ethereum seven hours before the ban. The address of the affected contract was publicly documented in Zama documents and was visible on blockchain explorers, making the freeze traceable and verifiable in real time.
Zama’s frozen funds are linked to overnight financing and legal disputes
According to further findings by ZachXBT, the freeze may be indirectly related to the recent controversy and legal issues surrounding the asset management and revenue generation protocol. Overnight financing.
Data indicates that wallet address 0xf7fcc deposited approximately $12.4 million in USDC in the Zama contract on May 11, 2026. This wallet appears to be linked to Overnight Finance, which has recently been embroiled in governance tensions. Notably, token holders have claimed that the rug may have been pulled by the development team. This led to a governance vote on the DeFi protocol for treasury asset allocation.
ZachXBT shared additional information indicating that Overnight Finance is also facing a civil case in court. One of the plaintiffs in the protocol case is Patagon Management, a company known in the DeFi space for engaging in aggressive governance strategies, such as hostile DAO takeovers/RFV raids. Although a direct causal relationship between the Department’s actions and these events has not been confirmed, the overlap between legal actions and treasury movements and frozen funds has raised concerns about how interconnected DeFi protocols could expose unconnected users, namely Zama users in this case, to external risks.
The department’s unilateral action sets an undesirable precedent
Circle’s freeze also reignited criticism of transparency practices by central exporters. According to ZachXBT, it appears that the Zama team did not receive any advance notice before blacklisting the cUSDC contract. If confirmed, this will exacerbate growing concerns about unilateral enforcement actions affecting decentralized applications and their users without warning.
Earlier in March 2026, Circle had reportedly frozen more than 16 hot wallets linked to various entities without publicly explaining its justification. However, the latest action goes further by targeting protocol-level nodes where user funds are pooled, rather than isolated wallets. This distinction is important because it raises questions about the risks of detention in supposedly decentralized systems.
At the time of writing, Circle has not issued an official explanation for its unilateral action to freeze Zama’s cUSDC contract.
Featured image from Shutterstock, chart from Tradingview
Editing process Bitcoinist focuses on providing well-researched, accurate, and unbiased content. We adhere to strict sourcing standards, and every page is carefully reviewed by our team of senior technology experts and experienced editors. This process ensures the integrity, relevance, and value of our content to our readers.
