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ZachXBT: $12.6M in Zama cUSDC Frozen After Circle Blacklisting
ZachXBT revealed that Circle may have blacklisted the contract address of privacy protocol Zama’s confidential USDC (cUSDC) on Ethereum around seven hours ago, freezing approximately $12.6 million in user funds. Further analysis showed the address had recently participated in an Overnight Finance governance vote on treasury allocation. Some users had previously accused the project team of conducting a rug pull.
ZachXBT also noted that one of the plaintiffs in a civil lawsuit against Overnight Finance is Patagon Management, an entity known for hostile DAO takeovers and attacks on protocol residual value. He suggested the plaintiff may have misrepresented the connection between the frozen address and the Zama contract to the court, while the Zama team appeared to have received no prior notice before the freeze was executed. — link
Zama founder Rand stated that the root cause of the incident has been identified and is unrelated to the Zama protocol or privacy technology itself. It stemmed from $12.5 million in USDC previously deposited by an address linked to the Overnight Finance hack. At the time of deposit, the address was neither sanctioned nor flagged as high-risk by KYT tools, allowing the funds to enter the protocol.
Because more than 99% of the cUSDC contract's funds originated from the address, the court ordered the entire wrapped contract to be frozen to prevent further movement of the disputed assets. Rand added that Zama has suspended the cUSDC, cUSDT, and cWETH wrapped asset contracts pending completion of the investigation and the adoption of appropriate measures.