Court Order Freezes $12.6M in Zama cUSDC Contract Amid Overnight Finance Dispute

A U.S. federal judge has ordered Circle to blacklist the Ethereum contract behind Zama’s confidential USDC (cUSDC), freezing about $12.6 million in assets. The action followed a class action lawsuit tied to Overnight Finance and triggered a rapid freeze of funds in the privacy-focused contract.

The blacklist was applied at 1:08 a.m. UTC, locking 12,606,386 USDC inside the contract. Public blockchain data identified the frozen address as Zama’s cUSDC system.

Overnight Finance Lawsuit Drives Emergency Freeze

The lawsuit, filed in the U.S. District Court for the Northern District of California, accuses Overnight Finance creator Maxim Ermilov of moving more than $15 million from protocol-related wallets ahead of a governance vote to liquidate the treasury.

Plaintiffs claim about $12.5 million of the moved funds was in USDC, with assets later bridged into Ethereum and routed into Zama’s confidential USDC contract.

Judge P. Casey Pitts issued a text-only emergency order requiring Circle to block the funds and scheduled a hearing for June 1.

Zama Says Contract Was Caught in Legal Dispute

Zama CEO Rand Hindi said the cUSDC contract was “caught in a crossfire” and confirmed no prior warning was given before the freeze. He also stated that most funds in the contract were linked to the disputed deposit and said the firm is investigating the situation.

Circle’s action effectively froze the entire pool because cUSDC operates as a wrapped asset where backing funds are pooled together.

Dispute Over Treasury Control and Fund Movement

Ermilov denied allegations of wrongdoing, arguing that OVN holders had no right to force a treasury distribution and described the funds as a mix of team assets, yield activity, and operational reserves.

He also said the transfer into Zama’s confidential system was intended to reduce public visibility for security reasons.

Broader Debate Over Crypto Freeze Powers

The case has drawn attention from blockchain analysts, who note that court ordered freezes can impact mixed user contracts, raising concerns about collateral effects on innocent participants. Circle has not commented publicly on the specific order, while the legal process continues ahead of the upcoming hearing.