In a striking development, a US federal court has frozen nearly $57.65 million worth of USDC stablecoin in connection with the contentious Libra memecoin scandal. This legal maneuver occurred on May 28, following a class-action lawsuit initiated in the Southern District of New York. The action, spearheaded by attorney Max Burwick, represents a significant step in addressing allegations against key figures tied to the Libra cryptocurrency, which has been mired in controversy since its inception.
The Court’s Decision
This temporary restraining order, issued by the Manhattan court, aims to preserve the disputed funds as the lawsuit unfolds. Burwick, representing Omar Hurlock and other plaintiffs, has accused Kelsier Ventures and its co-founders—Gideon, Thomas, and Hayden Davis—of orchestrating a scheme to deceive investors, leading to the misappropriation of over $100 million from liquidity pools. The legal action also implicates other industry players, including KIP Protocol and its CEO, Julian Peh, as well as Meteora and co-founder Benjamin Chow.
“We felt it necessary to request this freeze to prevent any further dissipation of assets as we seek justice for the affected investors,” Burwick stated. The court will revisit the issue on June 9 to decide if the freeze should continue during the litigation process.
The Unraveling of Libra
Launched with much fanfare, the Libra memecoin experienced a meteoric rise, reaching a market cap of $4 billion following an endorsement from Argentine President Javier Milei in February. However, this surge was short-lived. Within hours, the token’s value plummeted by 94%, sparking a political maelstrom in Argentina. Opposition figures clamored for Milei’s impeachment, though the motion failed to gain significant traction.
Adding fuel to the fire, Milei decided to disband the task force investigating the Libra debacle on May 19, a move that has drawn criticism from various quarters. Economist and Argentine Deputy Itai Hagman lambasted the decision, describing the investigation as a mere façade. “It was always a fake,” Hagman stated in a May 20 social media post. “They’re covering each other up because they’re completely up to their necks in it.”
Implications for the Crypto Sphere
This unfolding drama raises several questions about the future of memecoins and their impact on the broader cryptocurrency ecosystem. The scandal has not only tarnished Libra’s reputation but also cast a shadow over Solana, the blockchain platform where the frozen funds were held. Multisig Freeze Authority, responsible for the freeze, identified two Solana wallets containing the USDC—$44.59 million and $13 million, respectively.
The controversy has prompted some analysts to reassess the stability and governance of memecoins. “The Libra case exemplifies the risks inherent in the memecoin market, where hype can overshadow fundamental security concerns,” remarked crypto analyst Sarah Nguyen. “Investors need to be vigilant about the projects they support.” This sentiment echoes recent developments in the stablecoin market, such as Visa and Baanx’s launch of USDC stablecoin payment cards, which highlights the growing institutional interest in stablecoins despite ongoing controversies.
Looking Ahead
As the legal proceedings continue, the crypto industry will be closely watching the outcomes of this case. The implications for regulatory oversight and investor protection could be profound. With the hearing set for early June, stakeholders are eager to see how the court addresses the allegations and whether this case will set a precedent for handling similar disputes in the future. For a broader perspective on the stablecoin market dynamics, see Ripple’s recent offer for stablecoin issuer Circle, which underscores the strategic moves within the industry.
While the Libra saga underscores the volatility and unpredictability of the crypto market, it also highlights the need for robust regulatory frameworks to safeguard investors. As the dust settles, the industry must grapple with these challenges and strive for greater transparency and accountability—a task that won’t be easy in the ever-evolving world of digital assets.
Source
This article is based on: US court freezes $57M USDC allegedly linked to LIBRA scandal
Further Reading
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Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
