Stablecoin issuer Circle has come under scrutiny from US prosecutors over allegations that it has resisted court orders and law enforcement requests aimed at recovering crypto stolen through scams, according to officials in Wisconsin and New York.

The dispute centers on a Wisconsin fraud case in which Circle froze approximately 381,000 USDC but later declined to comply with a court order directing it to invalidate those tokens and issue replacements to law enforcement.

Circle has denied wrongdoing, arguing it lacked the technical ability to carry out the order, that the complaint should be dismissed, and that prosecutors failed to pursue alternative solutions.

Law enforcement officials say the case underscores the growing challenge of combating crypto-enabled fraud, as funds can be transferred across blockchains before courts can intervene.

Prosecutors have also questioned Circle’s policy of freezing assets only through a formal legal process, while industry experts argue the company could implement technology similar to rival Tether’s system for burning and reissuing stolen tokens.