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Arbitrator Rules in Favor of Circle Over Account Freeze of Tether-Backed Heka Funds

AI Market Summary
Disclosed filings show Circle froze Heka Funds (backed by Tether) after suspecting SVB-era USDC arbitrage redemptions supported USDT market share gains; an arbitrator later rejected Heka's $49m claims and found misconduct. The ruling reinforces issuer discretion around account controls and counterparty transparency, and may heighten scrutiny of stablecoin liquidity behaviors, fund disclosures, and related-party arrangements during stress events.
Impact level
● Medium
Affected assets
USUAL/USDT+0.35%
AI Insight · USUAL/USDTAI Insight
● Neutral
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According to unsealed court documents reported by the Financial Times, an arbitrator has ruled in favor of stablecoin issuer Circle regarding its late 2023 decision to freeze the account of Heka Funds, a crypto fund backed by Tether. The dispute originated during the March 2023 Silicon Valley Bank crisis when USDC briefly depegged. Circle alleged that Heka engaged in large-scale arbitrage and market manipulation to bolster USDT's market share, utilizing approximately $800 million in capital provided by Tether. Although Heka initiated arbitration in 2024 seeking $49 million in damages, the arbitrator rejected all claims in February 2025, citing "malicious conduct" and Heka's failure to disclose its relationship with Tether. Consequently, Heka was ordered to pay Circle $166,000 in legal costs. While Heka denies any wrongdoing, Circle and Tether have declined or failed to comment on the proceedings.
USDC
USDC-0.04%
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