Circle Internet Financial Faces Lawsuit from Celacare Technologies Over USDC Transfer Error
On Tuesday, September 10, 2024, Celacare Technologies, Inc. filed a complaint in the US District Court for the District of Massachusetts against Circle Internet Financial, LLC. The lawsuit arises from a transaction involving one million United States Dollar Coins (USDC) that Celacare claims were permanently lost due to an error in the transfer process.
According to the complaint, in May 2024, Celacare transferred $1,000,000 to Circle using its Coinbase account, expecting to receive one million USDC in return. These coins were issued on the Ethereum blockchain, with Circle allegedly promising to honor their exchange for dollars whenever requested. However, on July 3, 2024, an incident occurred when Celacare’s President, Kenneth Yates, attempted to send the USDC to a wallet address for a transaction with a counterparty. Yates inadvertently transcribed a “B” as an “8” while copying the address, sending the coins to an incorrect and unowned Ethereum address. As a result, the USDC became permanently inaccessible, described in the complaint as having been “destroyed.”
The complaint asserts that USDC should be classified as “financial assets” under the Uniform Commercial Code (UCC). Celacare contends that because it had an agreement with Coinbase that USDC were treated as financial assets, Circle is obligated to either reissue the coins or honor their value under the applicable UCC sections.
In an alternative argument, Celacare claims that Circle currently holds the original one million dollars belonging to Celacare and insists on its right to reclaim this amount. The complaint states that Circle would otherwise receive an unjustifiable windfall should it retain the funds.
In the days following the transaction mishap, Celacare attempted to reach out to the wallet address where the USDC was mistakenly sent, using a non-fungible token (NFT) to communicate. They requested proof of control over the wallet by asking for a small amount of USDC to be transferred. However, no response was received, leading Celacare to conclude that no one had access to the funds.
The complaint outlines three principal counts against Circle. The first count seeks enforcement of the USDC as a negotiable instrument under Delaware law. The second count requests the replacement of the lost USDC under the UCC, while the third count seeks restitution for money had and received, arguing that Circle should return the original one million dollars.
Celacare is demanding a jury trial and seeks several forms of relief, including a declaratory judgment affirming their ownership of the USDC before their loss, and a judgment requiring Circle to pay back the one million dollars or to reissue the USDC. Additionally, Celacare is asking for pre-judgment and post-judgment interest as permitted by relevant state laws.
Please contact BlockTribune for access to a copy of this filing.
