Court filings cited by the Financial Times say stablecoin issuer Circle blocked crypto fund Heka Funds in late 2023, alleging the fund used large-scale arbitrage to manipulate markets and help expand Tether’s market share.
According to ChainCatcher, the documents describe activity during the 2023 Silicon Valley Bank crisis, when USDC briefly fell below its $1 peg. The filings say Heka repeatedly bought discounted USDC and redeemed it with Circle for U.S. dollars, and Circle believed Heka’s redemption volume far exceeded that of other market participants.
Circle also suspected the proceeds ultimately flowed to Tether, supporting growth in USDT’s market size, the filings said.
Arbitration materials further stated that Tether invested about $800 million in Heka—around 75% of the fund’s assets—and waived stablecoin minting fees. The arbitrator found Heka did not fully disclose its relationship with Tether and knew the information would raise concerns for Circle.
In 2024, Heka initiated arbitration seeking about $49 million in lost profits tied to the account closure. In February this year, the arbitrator rejected all of Heka’s claims, found bad-faith conduct, and ordered Heka to pay Circle about $166,000 in legal and expert costs.
Heka denied market manipulation and said it has never been subject to a regulatory investigation over the matter. Circle declined to comment, and Tether did not respond to a media request for comment.
Court Filings: Circle Barred Heka Funds in 2023 Over Suspected USDC Arbitrage During SVB Crisis
2026-07-15 00:36:37
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