Patagon Management and co-plaintiffs filed class-action lawsuit against Overnight Finance founder for allegedly misappropriating $15.77M from treasury, triggering emergency court orders that froze $12.6M in Zama's confidential USDC contracts.
Regulation & Gov ·
Patagon Management and co-plaintiffs filed a class-action lawsuit against the founder of Overnight Finance, alleging misappropriation of approximately $15.77M from the protocol's treasury. The defendant allegedly moved funds out of treasury wallets in May, bridged them to Ethereum, and deposited them into Zama's confidential USDC wrapper contract. A court order issued a restraining order on wallets linked to the case, which froze $12.6M in the cUSDC contract.
The freeze occurred because the deposited funds represented over 99% of the cUSDC wrapper's total holdings at the time. When the deposit was made, the address had not been flagged by sanctions screening tools or compliance systems. However, once the court order was issued, it required the wrapper contract to be frozen to secure the disputed assets.
Zama stated it was not notified in advance of the court order and has paused its cUSDC, cUSDT, and cWETH contracts pending investigation. The platform clarified that the freeze targeted the specific wallet linked to the legal dispute rather than Zama itself, and that its confidential contract design does not obfuscate transaction sender or recipient information, limiting its utility for concealing fund origins.