Circle Suspends Heka Fund Over Tether Manipulation Concerns, Arbitration Files Show

According to arbitration filings made public on Tuesday in Boston federal court, Circle suspended Heka Funds' minting and redemption services in December 2023 after determining the Malta-based fund may have been manipulating markets to benefit Tether, its largest competitor.

Tether's cumulative investment in Heka's Elysium Global Arbitrage Fund reached $800 million, representing approximately 75% of the fund's total assets, according to arbitration testimony. Heka founder Fabio Frontini failed to disclose Tether as a dominant backer when opening the account in January 2022, citing only a single investor. Arbitrator Robert L. Dondero concluded this omission was deliberate and ruled in Circle's favor on contract claims, finding the company had the right to suspend services based on reasonable market manipulation concerns.