FT: Circle previously froze a cryptocurrency fund account backed by Tether, later receiving arbitration ruling in its favor

BlockBeats News, July 15th, according to the Financial Times report, based on the latest publicly available court documents, stablecoin issuer Circle had reportedly frozen Heka Funds, a Tether-backed crypto fund, at the end of 2023, on suspicion of market manipulation through large-scale arbitrage and assisting Tether in expanding its market share.

The documents show that during the 2023 Silicon Valley Bank (SVB) crisis, USDC briefly dropped below its $1 peg. Heka continued to buy discounted USDC in large quantities and redeemed them for US dollars from Circle. Circle believed that Heka's redemption volume far exceeded that of other market participants and suspected that the related funds ultimately flowed to Tether to help it expand the USDT market size.

The arbitration documents also revealed that Tether had invested approximately $800 million in Heka, accounting for about 75% of the fund's assets, and waived the stablecoin minting fees. The arbitrator found that Heka did not truthfully disclose the relationship with Tether and was aware that the related information would cause concern for Circle.

In 2024, Heka filed for arbitration after its accounts were frozen, claiming around $49 million in profit losses. In February of this year, the arbitrator dismissed all of Heka's claims, finding evidence of malicious behavior, and ruled that Heka should pay approximately $166,000 in attorney's fees and expert costs to Circle. Heka denied engaging in market manipulation and stated that it had never been subject to regulatory investigations for this; Circle declined to comment, and Tether did not respond to media requests for comment.