Stablecoin issuer Circle barred crypto fund Heka Funds from its platform in late 2023, citing concerns over large-scale arbitrage activities during the Silicon Valley Bank crisis. Court filings indicate the fund sought to profit from temporary deviations in USDC's peg to the dollar and potentially supported competing stablecoin expansion.
During the period when USDC traded below its $1 parity, Heka repeatedly purchased the discounted stablecoin and redeemed it directly with Circle for U.S. dollars. Circle viewed the redemption volumes as significantly higher than those of other participants. The issuer suspected that resulting proceeds contributed to growth in Tether's USDT market share.
Filings revealed that Tether had invested approximately $800 million in Heka, representing about 75 percent of the fund's assets, and had waived certain stablecoin minting fees. An arbitrator determined that Heka failed to fully disclose its ties to Tether, information that would likely have raised red flags for Circle.
Heka launched arbitration proceedings in 2024 seeking around $49 million in claimed lost profits from the account closure. In February this year, the arbitrator dismissed all claims against Circle, identified bad-faith conduct by Heka and ordered the fund to cover approximately $166,000 in legal and expert costs.
Heka rejected allegations of market manipulation and stated it has faced no regulatory investigations related to the matter.
During the period when USDC traded below its $1 parity, Heka repeatedly purchased the discounted stablecoin and redeemed it directly with Circle for U.S. dollars. Circle viewed the redemption volumes as significantly higher than those of other participants. The issuer suspected that resulting proceeds contributed to growth in Tether's USDT market share.
Filings revealed that Tether had invested approximately $800 million in Heka, representing about 75 percent of the fund's assets, and had waived certain stablecoin minting fees. An arbitrator determined that Heka failed to fully disclose its ties to Tether, information that would likely have raised red flags for Circle.
Heka launched arbitration proceedings in 2024 seeking around $49 million in claimed lost profits from the account closure. In February this year, the arbitrator dismissed all claims against Circle, identified bad-faith conduct by Heka and ordered the fund to cover approximately $166,000 in legal and expert costs.
Heka rejected allegations of market manipulation and stated it has faced no regulatory investigations related to the matter.