Tether is charged with illegally freezing $42.4 million USDT

Two Thai businessmen sued Tether questioning the legality of its freezing of 42.4 million USDTs.

On August 31, two Thai businessmen filed a lawsuit in the U.S. Federal District Court for the Southern District of New York, accusing Tether of freezing approximately 42.4 million USDTs without obtaining an official seizure order.

Summary of the incident

The plaintiff alleges that Tether froze cryptocurrencies in its possession without court authorization after receiving a request from the Homeland Security Investigation Bureau (HSI). Litigation documents show that Tether blacklisted 10 Ethereum addresses held by the plaintiff on October 30, 2025, with an accurate amount of USDT involved. At present, the accusation has not yet been judicial decided, and Tether has not publicly responded as of September 2.

Lack of legal basis for the freeze

The plaintiff alleges that Tether took action after receiving an informal request from HSI agents without authorization from any search warrant, court order, subpoena or other formal legal process. According to documents, the plaintiff Kasamvilas found that his account was restricted when he attempted to trade. After contacting Tether, the company only provided the email address of the HSI agent and did not explain the legal basis for freezing the funds.

The complaint states that Tether implemented a freeze through the "addBlackList" feature in its Ethereum smart contract to prevent token transfers at specified addresses. In addition, the "destrucyBlackFunds" feature allows Tether to destroy blacklisted USDTs. The plaintiffs emphasized that they obtained these tokens through secondary market transactions and had no direct customer relationship with Tether, so Tether's technical control over smart contracts does not mean that it has the legal right to dispose of tokens held by third parties.

Subsequent seizure order points to suspected fraudulent funds

On February 19, 2026, a magistrate in the District Court for the Eastern District of North Carolina issued an seizure order (No. 5:26-MJ-1267-JG). According to the New York complaint, the seizure order required Tether to destroy the USDT at the designated address and mint an equal amount of new tokens to transfer them into government-controlled wallets. Five days later, federal prosecutors announced the seizure of more than $61 million in USDT, and investigators accused the wallets of involving a cryptocurrency investment fraud commonly known as a "pig killing plate."

It was reported that HSI launched an investigation based on a victim's report and traced funds to be transferred through multiple wallets in an attempt to conceal the source, ownership and connection with a fake trading platform. The U.S. Department of Justice expressed its gratitude to Tether for assisting in the asset transfer, and Tether also confirmed its participation in the $61 million operation. However, the lawsuit states that the plaintiff's USDT of 42.4 million was still frozen when the case was filed, and the plaintiff requested to prevent Tether from destroying the tokens. Existing records cannot prove that the disputed tokens have been transferred to government wallets.

Litigation tests stablecoin issuers 'freezing authority

The plaintiff not only questioned the government's fund-tracking allegations, but also focused on the core issue: Can private stablecoin issuers restrict the circulation of secondary market tokens after receiving informal enforcement requests and before obtaining judicial authorization? The plaintiff believes that the February 2026 seizure order cannot retroactively legalize Tether's freezing in October 2025. In addition, the complaint questioned whether the seizure order would allow designated property to be destroyed and replaced with newly minted tokens before a final forfeiture decision.

The claims include finding that Tether constitutes embezzlement, movable property infringement, unjust enrichment, and seeking declaratory relief and injunctive relief. The plaintiff wanted the court to order Tether to remove the blacklist, claim for losses if the tokens had been destroyed, and hand over the proceeds Tether earned from the reserves corresponding to the freezing of USDT.

Data shows that Tether's law enforcement freeze is considerable. According to previous reports, Tether froze $514 million in 370 addresses within 30 days in 2026. According to BlockSec data, its 2025 blacklist covers 4163 Ethereum and wavefield addresses.

The next procedural steps include serving the complaint and Tether's response. If the plaintiff seeks immediate protection from the disputed token from being destroyed or reissued, the court may also consider an early injunction request. In addition, the plaintiffs informed the New York court that they had applied to the North Carolina court for the return of the USDT on July 31. There are currently no judgments on ownership, forfeiture or Tether liability in either case.