Court filings reveal Circle suspended Heka Funds after alleging the Tether-backed arbitrage fund may have manipulated USDC markets during the 2023 depeg crisis

The arbitrator never found that Heka manipulated USDC; Circle only had to show reasonable suspicion under a user agreement allowing limits “as we deem necessary” and suspension without liability. That is brutal primary-market counterparty risk for every stablecoin arb desk, especially because Circle employee David Norton initially called Heka’s trade rational in May 2023. In Circle’s own test, Heka paused after more than $587 million of redemptions over two weeks, and the USDC spread tightened instead of widening in May 2023.

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