Cointelegraph reported that a freeze on $12.5 million worth of cUSDC, which was locked in the smart contract of Zama, a privacy blockchain protocol based on Fully Homomorphic Encryption (FHE), has been lifted in just three days following a decision by a U.S. court.

This incident stemmed from a share dispute lawsuit involving Overnight Finance, a project entirely unrelated to Zama, last weekend. On May 11, one of the disputing parties in the lawsuit deposited $12.5 million into Zama's cUSDC Wrapper contract to hide assets. This was a massive amount, accounting for more than 99% of the total pool assets in the Zama contract at the time.

Subsequently, to prevent the tracking of the assets, the plaintiff obtained a Temporary Restraining Order (TRO) from the court against the stablecoin issuer Circle. Accordingly, Circle froze the entirety of Zama's smart contract following the court order, and Zama suffered damages as the pool itself became locked, despite not being a defendant in the lawsuit.

Zama stated that, prompted by this contingency, it will significantly accelerate its compliance roadmap to prevent similar risks in the future.