BlockBeats News, July 15th, according to the Financial Times, based on the latest publicly available court documents, stablecoin issuer Circle had previously frozen Heka Funds, a Tether-backed crypto fund, at the end of 2023 on suspicion of market manipulation through large-scale arbitrage trading and aiding Tether in expanding market share.

The documents show that during the 2023 Silicon Valley Bank (SVB) crisis, USDC briefly fell below the $1 peg. Heka consistently bought a large amount of discounted USDC and redeemed USD cash with Circle. Circle believed that the scale of Heka's redemptions far exceeded other market participants and suspected that the funds ultimately flowed to Tether to help expand the USDT market size.

The arbitration documents also revealed that Tether had invested approximately $800 million in Heka, accounting for about 75% of the fund's assets, and waived the stablecoin minting fees. The arbitrator found that Heka failed to disclose the true extent of Tether's backing and was aware that this information would raise concerns for Circle.

In 2024, Heka filed for arbitration due to account freezing, claiming around $49 million in profit losses. In February of this year, the arbitrator dismissed all of Heka's claims, determining that it had engaged in malicious behavior and ordered Heka to pay approximately $166,000 in legal and expert fees to Circle. Heka denied engaging in market manipulation and stated that it had never been subject to regulatory investigations as a result; Circle declined to comment, and Tether did not respond to media requests for comments.