Zama, a privacy platform, became embroiled in a judicial dispute unrelated to its activities on May 30, 2026.
Everything happened after Circle Freeze 12.6 million USDC included in the cUSDC contract without prior notice to Zama by order of a US court.
The move is related to a class action lawsuit filed on May 28 against Maxim Yermilov, the founder of decentralized finance (DeFi) protocol Overnight Finance.
What is emphasized in the text is Plaintiffs accuse him of transferring more than $15 million from the project’s treasury. Ahead of a governance vote calling for these funds to be liquidated and distributed to OVN token holders.
This action ultimately affected cUSDC, a confidential version of USDC, a stablecoin issued by Circle and pegged to the US dollar. Unlike traditional stablecoins, cUSDC allows balances and transfer amounts to be hidden from the public, while the addresses participating in the operation remain visible.
According to the complaint, on May 11, approximately 12.5 million USDC was transferred from an address associated with Ermilov to a cUSDC contract in Zama City. Plaintiffs then requested an emergency injunction to prevent these funds from being transferred while the litigation proceeded.
May 29th, Federal Judge P. Casey Pitts ordered Circle to freeze USDC involved, a move the company did hours later.. The order ultimately affected Zama’s cUSDC contract on Ethereum, identified by address 0xe978F22157048E5DB8E5d07971376e86671672B2, where the disputed funds were deposited.
Due to cUSDC’s architecture, the freeze ultimately affected the entire pool, not just the disputed assets.
Hindi talked about ‘hackers’, but this case is a civil case
One of the initial points of confusion was the explanation published by Rand Hindi. The founder of Zama argued as follows.
However, court documents indicate that the cause of the freeze was: This is not a recent hack or exploit against Overnight Financebut a civil lawsuit was filed for alleged misappropriation of funds from the Protocol Treasury.
In an interview with The Block website, Yermilov denied the accusations and claimed that the funds did not belong to the community treasury, but to an account managed by the team and used to operate the protocol.
Discussion on privacy and censorship
This controversy is not limited to overnight financing. On-chain researcher Zach
“Overall, I sympathize with the users of Zama City who are indirectly affected by this civil lawsuit Imbroglio in the United States,” he wrote.
This situation has frequently reignited debate within the ecosystem about how much influence centrally controlled stablecoins can have. A decentralized protocol in the event of a court order against a portion of the funds.
Similarly, an X user known as CyberSatoshi also warned that the most sensitive point is not to block individual wallets. However, the blacklisting of “live smart contracts”. To him, this precedent is troubling because it shows that earmarked funds entering shared infrastructure can ultimately affect the entire contract. “Stablecoins on DEX routers, lending markets, and yield farms are never safe,” he said.
He concluded with a direct critique of the centralized stablecoin model within DeFi. “You can’t build permissionless finance with a centralized kill switch.”
From Zama they argue that this issue reflects exactly that tension. “This is an example of collateral damage affecting public smart contracts due to the centralized architecture of the underlying assets,” the company said.
Another relevant factor is Hindi’s assurance that Circle had not previously notified Zama of the contract freeze.
In this regard, Hindi announced that it is “temporarily suspending the contracts of cUSDC, cUSDT, and cWETH until we complete our investigation, identify all addresses related to this incident, and take appropriate action.”
This news caused price fluctuations in ZAMA tokens. As you can see from the graph, After the freeze became known, the asset fell from the $0.039 zone to a low around $0.032.. Subsequently, following public explanations from Mr. Circle and Zama founder Rand Hindi, the stock recovered some of its losses and returned to trading around $0.036.
Zama City’s legal team is currently cooperating. The various parties involved will isolate the affected addresses and restore access to users unrelated to the judicial dispute.
A hearing on the temporary restraining order is scheduled for June 1, when the court will hear arguments from the parties before deciding the next steps in the case.
(Tag translation) Altcoin
