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New York Attorney General Letitia James and Manhattan District Attorney Alvin Bragg have sent a letter to Congress, asserting that the GENIUS law regulating the issuance and circulation of stablecoins in the U.S. allows token issuers to profit from stolen cryptocurrencies.
The prosecutors claim that the legislation lacks a crucial provision requiring issuers to return stolen assets to crime victims. James referred to this as a loophole that enables major firms Tether and Circle to maintain control over digital assets, even when those assets are marked as stolen. The letter notes that both companies hold government bonds worth billions of dollars to back their coins and earn substantial interest from these securities. Prosecutors estimate that in 2024 alone, both companies generated approximately $1 billion in profit, with part of this amount derived from interest accrued on funds belonging to victims of hacking and fraudulent crypto schemes, according to James and Bragg.
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The GENIUS law was signed by President Donald Trump in July 2025. This legislation mandates that issuers maintain sufficient reserves to ensure that the stablecoins issued are backed one-to-one by liquid assets, whether in U.S. dollars or short-term Treasury bonds.
Prosecutors emphasize that if a bank were informed about the theft of funds, the individual would typically recover their money, as there is a clear process for returning such funds. However, the GENIUS law is designed solely to prevent the bankruptcy of stablecoin-issuing companies and does not address the handling of assets obtained through criminal activities. When the stablecoin issuer USDC, Circle, freezes a wallet, it continues to accumulate funds instead of transferring them to law enforcement or the victim, stated James. According to the prosecution, as of November, Circle was holding over $114 million in frozen assets.
Data from the AMLBot platform indicates that from 2023 to 2025, Tether froze approximately 3.3 billion USDT across 7,268 addresses, while Circle blocked a comparatively smaller amount: 109 million USDC on 372 addresses.
