As law enforcement officials around the country grapple with a flood of victims falling prey to scammers using cryptocurrency, authorities in two states say that the crypto giant Circle has snubbed court orders directing the firm to recover stolen funds.

Circle pitches its USDC token, a so-called stablecoin pegged to the US dollar, as the new face of finance. The $17-billion firm is the second largest stablecoin issuer and has touted partnerships with Visa, Mastercard and global banks, as well as its work with police to tackle sophisticated scams.

But some officials, who often rely on stablecoin issuers to fight illicit activity, have begun to raise alarms about instances of Circle denying law enforcement requests to freeze…