Cryptocurrencies blocked: How stablecoin issuers like Tether and Circle can help victims

After a cryptocurrency scam, the shock is often immense. Many victims assume their invested capital is lost forever once it falls into the hands of perpetrators on a decentralized blockchain. The widespread belief that cryptocurrencies like Bitcoin or Ethereum are fundamentally unassailable and unrecoverable further intensifies this feeling of helplessness. However, it is often overlooked that there is a significant exception: With centrally issued stablecoins like Tether (USDT) or USD Coin (USDC), it is possible, under certain conditions, to freeze stolen funds and thus prepare for their eventual recovery.

The technical background: Central access within a decentralized structure

While fully decentralized cryptocurrencies like Bitcoin are not subject to any central control, stablecoins like USDT and USDC are issued by companies – specifically Tether and Circle, respectively. These issuers have certain control mechanisms embedded directly in the smart contract of the respective token. The underlying program code contains administrative functions that allow the issuer to intervene in response to government orders or regulatory obligations.

Key functions include:

• Blacklist: If a wallet address is blacklisted, it can no longer execute any further transactions.
• Freeze: The tokens located at the address in question will be locked and will no longer be movable.
• Wipe: In extreme cases, frozen tokens can be removed from one address and transferred to another – for example, that of the aggrieved investor.

These intervention options at the issuer level represent a key difference compared to traditional crypto assets. Even if the perpetrator possesses the private key, they remain unable to access the frozen tokens. The assets are effectively blocked, thus gaining valuable time for further legal action.

The practical process: From fraud case to account suspension

If stablecoins are involved in a cryptocurrency fraud, victims have a clearly structured framework for action. In practice, the procedure regularly unfolds as follows:

Once fraud is discovered, swift action is required, as perpetrators often transfer the obtained amounts within a short period of time.

The next step involves blockchain analysis. Specialized service providers or appropriately experienced law firms can trace the transaction history and, using a process called tracing, identify the wallet containing the stolen funds.

The issuer – Circle or Tether – is then contacted. This usually requires a thorough tracing report, a structured statement of facts, and ideally, a criminal complaint. A formal letter of demand from a lawyer significantly increases the chances of success.

Following a review by the issuer's compliance department, the wallet in question can then be blocked. In the best-case scenario, this happens within a few hours; however, a period of one to three days is more realistic.

The legal starting points: Basis for repatriation

Blocking the tokens is the crucial first step in securing the assets. By blocking them, the perpetrator effectively loses control over the relevant amounts, creating considerable pressure.

In parallel, civil claims must be asserted. These include, in particular, claims based on unjust enrichment pursuant to Section 812 of the German Civil Code (BGB), as well as tort claims pursuant to Section 823 Paragraph 2 of the German Civil Code (BGB) in conjunction with the criminal offense of fraud, or pursuant to Section 826 of the German Civil Code (BGB).

The freeze acts as a preliminary protective measure, safeguarding the later enforcement of a court judgment. The pressure created by the freeze often leads to out-of-court settlements or agreements, as perpetrators have an interest in avoiding further consequences or retaining access to other assets.

Conclusion: An effective tool against crypto fraud

The ability to freeze centrally issued stablecoins like USDT and USDC provides a significant advantage to fraud victims. This puts the perceived inviolability of the blockchain into perspective. Victims gain an effective means of securing their assets and laying the groundwork for recovery.

Crucial here is the coordinated collaboration of specialized lawyers, blockchain analysts and the respective issuers of the stablecoins.

If you have fallen victim to a cryptocurrency scam involving stablecoins, swift action is crucial. Contact a law firm specializing in cryptocurrency law as soon as possible to review your options and initiate the necessary steps. Our experienced lawyers will support you with in-depth expertise in asset recovery and cryptocurrency fraud to enforce your claims.

Frequently asked questions about freezing stablecoins and recovering cryptocurrencies