Court Holds Stablecoin Issuer Owed No Duty To Freeze Stolen Tokens Absent The Court Order Its Policy Required

Posted: November 9, 2026 / Written by: Ian Weiss / Category Motion to Dismiss

Court Holds Stablecoin Issuer Owed No Duty To Freeze Stolen Tokens Absent The Court Order Its Policy Required

On November 2, 2026, in Kaplan v. Circle Internet Group Inc., Index No. 650459/2026, Justice Joel M. Cohen of the New York County Commercial Division granted the motion of Circle Internet Group, Inc. and Circle Internet Financial, LLC (together, “Circle”) to dismiss the amended complaint against them. Plaintiff alleged that an unidentified thief stole more than $13 million of USDC, a stablecoin that Circle issues and administers, from plaintiff’s cryptocurrency wallet. Plaintiff alleged that Circle had the ability to freeze the stolen USDC remaining in the thief’s wallet but declined his requests to do so because its then-applicable policy required a court order, and that, before the court issued a temporary restraining order, the thief had swapped all of the stolen USDC for other cryptocurrency. Plaintiff had no prior relationship with Circle. The court dismissed plaintiff’s negligence and aiding-and-abetting claims against Circle, holding that Circle owed plaintiff no duty to act. The Court explained:

[W]hile there are some circumstances where liability is imposed when “defendant’s relationship with either the tortfeasor or the plaintiff places the defendant in the best position to protect against the risk of harm” (Hamilton v Beretta U.S.A. Corp., 96 NY2d 222, 233 [2001]), those circumstances are typically limited to situations “that require[] defendant to protect plaintiff from the conduct of others. Examples of these relationships include master and servant, parent and child, and common carriers and their passengers” (id.). Here, Plaintiff does not allege any such relationship with Circle or even between Circle and John Doe. Moreover, expanding a duty to Plaintiff in this case would impose the specter of “limitless liability” on Circle that New York law cautions against (Beretta, 96 NY2d at 233), and would essentially make Circle an insurer against bad actors in secondary market transactions involving USDC. . . .

In sum, the factors governing whether to impose a negligence duty on Circle as a stranger to the dealings between Plaintiff and John Doe point firmly against doing so in these circumstances. Given the myriad ways in which USDC is traded, imposing a time-sensitive duty on Circle to step in as soon as a potentially damaged holder raises the alarm could create broad and uncertain liability. Moreover, when faced with such a situation, Circle would have to make an instant determination whether the party requesting the “blocklisting” is in the right, at the risk of facing potential liability from the blocklisted party if it makes the wrong choice. This is the type of situation in which imposing a broad common law negligence duty to all USDC holders in the absence of any prior relationship between the parties is unwarranted. (footnote omitted)

Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning a defendant’s duty to protect against the conduct of third parties.

To read more about whether a financial institution owes a duty to protect a non-customer from third parties’ wrongdoing, see Schlam Stone & Dolan’s related Commercial Division Blog posts on a decision holding that a bank owed no duty of care to a non-customer whose funds passed through an ordinary depository account and a decision applying the Court of Appeals’ holding that banks breached no duty to a law firm that deposited a counterfeit check from a purported client.