Circle Faces Lawsuit Over $1 Million USDC Lost To Incorrect Wallet Address
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Circle, the company behind the stablecoin USDC, has been sued by pharmaceutical company CelaCare after its CEO transferred $1 million worth of USDC to the wrong Ethereum address on July 3, 2024. The money has been lost forever in the incident and now, CelaCare is seeking for the reimbursement of the lost amount from Circle.
According to a recent report, the lawsuit was filed in a Massachusetts district court this week, asserting that CelaCare’s CEO, Kenneth Yates, sent the USDC from the company’s Coinbase account to a contract counterparty with the wrong wallet address by mistake.
Circle Faces Legal Battle
The suit stated that Yates entered the destination address from a PDF document, but there was an error of transcription. His computer substituted the letter “B” with the numeral “8” which led to the funds being transferred to the wallet address which cannot be accessed with the help of any known owner.
CelaCare then sent a message to the wallet address to verify if the funds were really stolen and asked the owner to send $5 worth of USDC back to the address. The message stated:
“On July 3, 2024, Celacare Technologies Inc. sent one million USDC to this address erroneously. If you have the private key to this wallet address, please send 1.46 USDC to any address and contact us.”
In the lawsuit, CelaCare says that Circle should return the lost USDC. According to the UCC, USDC is said to be a ‘financial asset’ and the transaction was made through Coinbase which is said to be a ‘securities intermediary.’ Thus, CelaCare believes that Circle has no option but to reissue or ‘honor’ the lost USDC.
CelaCare has sent a formal notice to Circle for refund on 15th of August with a draft of the lawsuit. Nevertheless, on September 6, Circle’s legal department rejected the refund claim. Therefore, CelaCare is now moving for a trial by jury to get the court to determine that the USDC had been completely demolished. The company is asking for $1 million in USDC or any fiat currency for the funds that were lost in the process.
This case presents the question that how should stablecoin providers like Circle handle such transactions which are accidental in nature. Another stablecoin issuer, Tether, provides a recovery service for a fee to reverse lost transactions, but Circle does not have a similar service at the moment.
