Core Reasons for Suspension
Published 7/15/2026, 3:35:30 PM
Circle suspended the accounts of Heka Funds, a Malta-based trading firm, in December 2023 due to concerns that the fund was acting as a proxy for Tether (USDT) to manipulate the market for USDC. The details of this suspension and the subsequent legal victory for Circle became public in July 2026 following the release of arbitration findings.
Core Reasons for Suspension
The suspension was triggered by Circle's internal surveillance, which identified patterns suggesting Heka was not an independent arbitrageur but a tool for competitive interference.
- Undisclosed Tether Control: While Heka initially disclosed only a single investor, arbitration revealed that Tether was the dominant backer, providing approximately $800 million (roughly 75% of the fund's assets) [Source: https://crypto.news/circle-wins-arbitration-against-tether-backed-heka-funds/]. Circle's leadership testified that the account would have been rejected immediately had this relationship been disclosed.
- Market Manipulation Patterns: During the March 2023 USDC depeg event, Heka redeemed over $587 million in USDC within two weeks [Source: https://www.theblock.co/post/408377/circle-suspended-tether-backed-fund-over-market-manipulation-concerns-arbitration-filings-show]. Circle observed that when they requested Heka to pause trading, market spreads tightened rather than widened, suggesting the activity was "manufactured" to create artificial pressure on USDC.
- Preferential Economics: Tether reportedly waived USDT minting fees for Heka. This allowed the fund to execute arbitrage trades that were not economically viable for other market participants, further supporting Circle's claim that the fund's purpose was to benefit Tether at Circle's expense [Source: https://cryptobriefing.com/circle-heka-funds-tether-arbitration/].
Arbitration Findings (July 2026)
Heka Funds sought $49 million in damages from Circle for lost profits. However, the arbitrator ruled entirely in Circle's favor, concluding that Heka's failure to disclose its Tether connection was an intentional omission designed to deceive Circle [Source: https://www.ft.com/content/circle-tether-heka-arbitration-findings].
| Key Metric | Detail | Source |
|---|---|---|
| Tether Investment | $800 million (~75% of Heka's assets) | Crypto.news |
| USDC Redemptions | $587 million during March 2023 depeg | The Block |
| Heka Claim Amount | $49 million (denied) | FT |
| Legal Fees Awarded | ~$166,000 (to be paid by Heka to Circle) | The Block |
Summary of Entities Involved
- Heka Funds: The Malta-based fund whose accounts were suspended.
- Abraxas Capital: The London-based manager of Heka's Elysium fund.
- Tether (USDT): The undisclosed primary financier of the fund.
- Circle (USDC): The issuer that successfully defended its right to suspend the fund based on manipulation concerns.
The arbitrator's final ruling emphasized that Circle acted within its rights to protect its ecosystem from what it perceived as deceptive and predatory trading practices backed by its primary competitor [Source: https://cryptobriefing.com/circle-heka-tether-dispute-details-2026]. While the arbitration is resolved, original court filings would be required to verify the exact breakdown of the legal fees awarded.