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Circle Takes Action Amid LIBRA Token Controversy
In a significant move that underscores growing regulatory scrutiny within the crypto industry, Circle, the issuer behind the popular USD Coin (USDC), has frozen nearly $58 million worth of USDC in connection to the ongoing LIBRA memecoin scandal. The company took decisive action after on-chain analytics platform Arkham revealed on May 29 that two Solana wallets, allegedly owned by the LIBRA deployer and project team, had accumulated a combined $57.65 million in USDC. These funds are now locked after Circle executed a freeze using its multisignature authority.
Class-Action Lawsuit Intensifies Legal Pressure
The frozen assets are linked to an active class-action lawsuit initiated in March in the Southern District of New York. Hundreds of LIBRA token investors have come together to sue Kelsier Ventures, a venture capital firm specializing in cryptocurrencies, along with its co-founders Gideon, Thomas, and Hayden Davis. The high-profile case, brought forward by the law firm Burwick, also names prominent figures from the crypto space including Benjamin Chow, co-founder of Meteora, and Julian Peh of KIP Protocol, alleging their involvement in the promotion and development of the LIBRA token.
LIBRA’s Meteoric Rise and Collapse
The LIBRA token captured global attention following its February 2025 launch, largely fueled by social media endorsements from Argentina’s President Javier Milei. Marketed as a blockchain-powered initiative to empower small businesses in Argentina, LIBRA’s price skyrocketed from mere cents to over $5 within an hour of launch, propelling its market capitalization past $4 billion.
However, the dramatic rise was followed by a devastating collapse. According to the lawsuit, insiders controlling approximately 70% of the token’s total supply allegedly dumped their holdings, resulting in a price drop exceeding 90%. While these insiders reportedly profited by more than $150 million, investors suffered staggering losses totaling over $250 million.
Political and Regulatory Ramifications
The incident has ignited political backlash in Argentina, leading to intense scrutiny of President Milei, who later deleted promotional posts and denied involvement. Although an official investigation task force was established, it was disbanded on May 19, sparking further controversy. The freeze of funds by Circle signals that U.S. courts are prepared to intervene in high-profile crypto fraud cases, offering a pathway for potential restitution to affected investors.
Setting a Precedent in Crypto Accountability
If successful, the LIBRA case could mark a pivotal moment for investor protection in the blockchain space, setting legal precedents for holding cryptocurrency founders and promoters accountable for misleading practices. As the crypto market continues to grow, ensuring transparency and safeguarding investor interests remain crucial for the industry’s long-term credibility.
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