Circle blocked crypto fund Heka Funds in late 2023, according to newly public court filings cited by the Financial Times. The documents say Circle suspected the fund of using large-scale arbitrage to manipulate the market and help Tether gain share during the stress around Silicon Valley Bank in 2023, when USDC briefly fell below its $1 peg. The filings state that Heka bought discounted USDC in size and redeemed it with Circle for dollars, with Circle concluding the activity far exceeded that of other market participants. In the same arbitration record, Tether was described as having invested about $800 million in Heka, representing roughly 75% of the fund’s assets, while also waiving stablecoin minting fees. Heka later brought an arbitration claim over the account closure, seeking about $49 million in lost profits. In February this year, the arbitrator rejected all claims, found bad faith conduct, and ordered Heka to pay about $166,000 in legal and expert costs. Heka denied market manipulation, Circle declined to comment, and Tether did not respond to a request for comment.
Circle blocked crypto fund Heka Funds in late 2023, according to newly public court filings cited by the Financial Times. The stablecoin issuer said it suspected Heka of using large-scale arbitrage to manipulate the market and to help Tether expand its market share.
The filings say that during the 2023 Silicon Valley Bank crisis, USDC briefly traded below its $1 peg. Heka kept buying discounted USDC in large amounts and redeemed the tokens with Circle for U.S. dollars. Circle said the scale of those redemptions was far larger than that of other market participants, and suspected the money ultimately flowed to Tether to help expand USDT’s market presence.
Arbitration documents also said Tether had invested about $800 million in Heka, accounting for roughly 75% of the fund’s assets, and had waived stablecoin minting fees. The arbitrator found that Heka did not truthfully disclose its backing relationship with Tether and knew that the information would raise concerns at Circle.
In 2024, Heka filed for arbitration after its account was blocked, seeking about $49 million in lost profits. In February this year, the arbitrator rejected all of Heka’s claims, found that it had acted in bad faith, and ordered the fund to pay about $166,000 in attorneys’ fees and expert costs to Circle.
Heka denied any market manipulation and said it has never faced a regulatory investigation over the matter. Circle declined to comment, while Tether did not respond to media requests for comment.
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