Circle Prevails in Arbitration With Tether-Backed Heka Funds Over Alleged Market Manipulation

Circle, the issuer of USDC, has won an arbitration case brought by Heka Funds, a Tether-backed investment vehicle that Circle removed from its platform in late 2023 over concerns about trading behavior it viewed as market manipulation. The dispute has now entered the public record, shedding light on the intensity of competition between the two largest stablecoin issuers in a market valued at about $307 billion. Heka Funds, a Malta-based investment vehicle managed by London's Abraxas Capital Management and backed by Tether, was flagged by Circle after what the company said were suspicious trading patterns on its platform that appeared designed to benefit USDT at USDC's expense. Circle subsequently banned Heka from its platform. Heka initiated arbitration in 2024, claiming the ban caused $49 million in lost profits. The arbitrator rejected the claim and ruled in Circle's favor, affirming Circle's decision to remove the fund from its ecosystem. The case underscores the rivalry between USDT and USDC, which together dominate the stablecoin market. USDT remains the larger token by a wide margin, while USDC holds a significant share, particularly among institutional users and in more heavily regulated venues. The available details do not clarify whether Tether had direct involvement in, or knowledge of, Heka's trading strategies. Still, the optics of a Tether-backed entity being accused of manipulation on Circle's platform highlight the trust gap between the two camps. Made public on July 14, the dispute also points to a broader shift in how stablecoin issuers are policing activity tied to their platforms. Circle's actions suggest that monitoring for potentially manipulative trading is increasingly being treated as a core function, given the dependence of stablecoins on peg stability and market confidence. For investors, Heka's $49 million claim quantifies the stakes of being cut off from a stablecoin issuer's ecosystem. Circle's arbitration win provides a concrete reference point it can use with institutional allocators focused on governance and risk controls.