FT: Circle wins arbitration against Tether-backed fund, $49M claim dismissed

Circle has won an arbitration case after freezing the account of Heka Funds, a crypto fund supported by Tether, in late 2023, the Financial Times reported. According to the report, Circle froze the account on suspicion that Heka was disrupting market order with large-scale arbitrage and helping to expand Tether's market share. During the Silicon Valley Bank (SVB) crisis in 2023, when USDC temporarily fell below one dollar, Heka Funds purchased a large amount of the discounted stablecoin and then redeemed it for dollars from Circle. Circle suspected that Heka's redemption volume was significantly larger than that of other market participants and that the recovered funds ultimately flowed to Tether to be used for expanding the USDT supply. Heka filed for arbitration in 2024, claiming it lost approximately $49 million in profit opportunities due to the account freeze. However, in February of this year, an arbitrator dismissed all claims and ruled that Heka's actions were malicious. Heka was also ordered to pay Circle approximately $166,000 in legal and expert fees. Heka has denied the market manipulation allegations, stating it has never been investigated by regulators for the matter. Circle declined to comment, and Tether did not respond to media inquiries.