Circle Bans Tether-Supported Fund Heka by End of 2023, Suspected of Market Manipulation to Expand USDT Share
According to the Financial Times, based on court documents, stablecoin issuer Circle banned the Tether-supported crypto fund Heka Funds by the end of 2023, suspecting it of manipulating the market through large-scale arbitrage and helping Tether expand its market share.
During the SVB crisis, USDC depegged, and Heka bought large amounts of discounted USDC and redeemed it for USD, far exceeding other participants, leading Circle to suspect the funds were flowing to Tether.
Documents show Tether invested about $800 million in Heka, accounting for 75% of the fund's assets, and waived minting fees. Arbitration found that Heka did not disclose the support relationship.
In 2024, Heka claimed $49 million in profit losses in arbitration, but in February this year, the arbitrator dismissed all claims and ordered Heka to pay Circle $166,000 in fees.
The market mechanism exposes competition and arbitrage behavior among stablecoin issuers, affecting the reserve management and trust of USDC and USDT, with investors concerned about issuer governance risks.
Source: Public Information
ABAB AI Insight
Circle and Tether are in fierce competition as major stablecoin issuers, similar to market arbitrage cases during the SVB crisis, which have amplified friction between issuers due to depegging events.
Capital pathways show that funds like Heka utilize crisis arbitrage, with Tether-supported funds flowing to expand USDT's share. Circle's ban is a protective measure for its ecosystem, and the arbitration outcome reinforces the issuer's risk control autonomy.
This indirect conflict between Circle and Tether is in a phase of public exposure, akin to early governance controversies in the stablecoin industry.
Essentially, this is about competitive regulation; Circle's ban on Heka and victory in arbitration aim to combat suspected manipulative arbitrage behavior to maintain USDC's peg stability and limit competitors from expanding market share through indirect channels.
ABAB News · Cognitive Law
- Crisis arbitrage often exposes conflicts of interest between issuers.
- Bans and arbitration are self-protection measures for stablecoin issuers.
- Lack of transparent disclosure is the greatest risk point for regulation and trust.