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FollowingTLDR
Two Thai businessmen have sued Tether in federal court in New York over 42.4 million USDTs frozen in October 2025. The plaintiff alleges that Tether blacklisted his wallet at the informal request of Department of Homeland Security investigators and did not produce a search warrant at the time. The seizure order was issued several months later (February 2026), but specific tokens were still frozen when the plaintiff filed the lawsuit. Prosecutors also traced more than 61 million USDTs to wallets related to investment fraud. The plaintiff requested to remove the blacklist, return the tokens, and claim compensation if the funds were destroyed.
Summary of the incident
Two Thai businessmen, Nutthawat Rukthammachalern and Natthawat Kasamvilas, filed a lawsuit in the Federal District Court for the Southern District of New York on August 31. They accused Tether of freezing its cryptocurrency without legal authorization, involving approximately 42.4 million USDTs. According to the complaint, Tether blacklisted ten Ethereum addresses on October 30, 2025, which exactly held 42,417,785.62 USDTs.
Freezing process
The plaintiff alleges that Tether acted at the informal request of an agent for the Homeland Security Investigation Bureau without a search warrant, court order, or subpoena. Kasamvilas contacted Tether after discovering the funds were frozen while conducting the transaction, but the company only directed them to an email from an HSI agent without explaining the legal basis for the freeze. Tether uses the "addBlackList" feature in the smart contract to block token transfers at specific addresses. The plaintiff stated that the tokens were obtained through normal commercial transactions in the secondary market and had never established an account relationship directly with Tether. They believe that although Tether has technical control over the contract, it has no right to claim legal rights over other people's tokens.
Follow-up search warrant
On February 19, 2026, a North Carolina magistrate issued a seizure order requiring Tether to destroy the USDT in the marked address and minte new tokens to send to a government-controlled wallet. Five days after the seizure order was issued, prosecutors announced that they had seized more than 61 million USDTs, saying the funds came from wallets linked to investment fraud (commonly known as "pig killing trays"). Investigators said the case began with a victim reporting that funds were circulated through multiple wallets designed to hide the source. The U.S. Department of Justice expressed its gratitude to Tether for its assistance, and Tether also confirmed its participation in the $61 million operation. But the new lawsuit states that 42.4 million USDTs were still frozen when the plaintiff filed the lawsuit, and court records did not show that these specific tokens had been sent to government wallets.
Legal disputes
The lawsuit raises a larger question: Can stablecoin companies freeze tokens based solely on an informal request before the court steps in? The plaintiffs also argued that the February seizure order could not retroactively legalize the October freeze. They asked the court to issue an injunction, order compensation, and demand the return of any proceeds from frozen reserves. As of September 2, Tether had not publicly responded to the lawsuit. Claims include illegal appropriation, personal injury and unjust enrichment. This isn't an isolated freeze-Tether reportedly froze $514 million in 370 addresses in a single month in early 2026. In addition, the plaintiffs informed the New York court that they had filed a request for the return of USDT in North Carolina on July 31, which was also pending.
