US Court Lifts Circle Freeze on Zama's $12.5M cUSDC Contract

Northern District of California reverses the USDC freeze on June 1

A federal judge in the Northern District of California lifted the temporary restraining order (TRO) that froze Zama's Confidential USDC (cUSDC) smart contract on June 1, 2026, restoring approximately $12.5 million in USDC to depositors. Judge P. Casey Pitts had issued the original TRO on May 29 as part of a civil case — Newton AC/DC Fund L.P. et al. v. Maxim Ermilov et al. — and scheduled a June 1 review hearing at which both sides appeared for the first time. After that hearing, the court determined the freeze was unwarranted and lifted the order.

Overnight Finance civil dispute triggered a blanket freeze on Zama's protocol

The case arose from a dispute among stakeholders of Overnight Finance, a DeFi project unrelated to Zama. On May 11, an address tied to that dispute deposited approximately $12.5 million in USDC into Zama's cUSDC wrapper contract. The plaintiffs — Newton AC/DC Fund and Delaware-based Patagon Management — obtained a court order to freeze those funds. The TRO was granted ex parte on May 29 without notifying Zama, and Circle executed the contract-level blacklist on May 30. Zama was not named as a defendant in the case.

One deposit represented 99 percent of the pool, freezing all cUSDC users

The disputed deposit represented more than 99 percent of the cUSDC contract's total value at the time. Circle's blacklist of that address froze the entire pool, locking out every other user for three days regardless of their connection to the Overnight Finance dispute. Zama engaged U.S. and Swiss legal counsel over the weekend and presented the case to Judge Pitts at the June 1 hearing. Rand Hindi, Zama's co-founder and CEO, confirmed the outcome:

"The same court has now lifted the freeze, determining that it was unwarranted. Zama's cUSDC contract, along with all the USDC held in it, are now back to normal.", 01 June 2026. — Rand Hindi, Co-founder and CEO, Zama

First court-ordered Circle blacklist reversed; Zama adopts transitive compliance

The Defiant described the reversal as the first time a court-ordered Circle contract-level blacklist in a private civil dispute had been overturned through litigation. Zama committed to a "transitive compliance" model in which a Circle freeze on a specific USDC address automatically propagates only to the corresponding cUSDC balance — without locking uninvolved depositors out of the pool. The underlying suit against Maxim Ermilov continues; the court lifted the pool freeze, not the lawsuit itself.