Tether hit with another freeze lawsuit as challenges to its USDT freezes mount

Conduit, a cross-border payments firm, has sued Tether over a $2.76 million USDT freeze it says has locked up its main operating account for more than a year. 

Tether’s motives for freezing wallets have come under increased scrutiny as firms and individuals drag the issuer to court regarding their assets. 

Why is Conduit suing Tether? 

Conduit has sued Tether over a $2.76 million USDT freeze. The complaint landed in the U.S. District Court for the Southern District of New York on October 5. Four Tether entities are named as defendants: Tether Holdings, Tether International, Tether Operations, and Tether Investments. Conduit is represented by law firm Baker Botts.

Conduit moves money across more than 100 countries using stablecoins like USDT and Circle’s USDC. It says the wallet Tether froze worked like its operating bank account, meaning the freeze has hurt its business. Meanwhile, Tether keeps earning interest on the Treasury bonds backing the frozen tokens.

“Conduit owes no money to Tether and has no obligation to Tether,” the complaint reads. Conduit wants the $2.76 million released and is asking for an additional $2.76 million to cover damages and the profits it says Tether pocketed on the reserves.

The freeze traces back to a case referred to Brazil’s Federal Police involving Onix Intermediações, a company Conduit once served. But Conduit’s filing points out that law enforcement confirmed it never flagged Conduit’s treasury wallet. 

Additionally, a Brazilian court found Conduit was not under investigation in the Onix matter.

Onix stopped using Conduit’s platform in April 2025, roughly a month before the treasury wallet was even created, and the wallet never held any of Onix’s money, according to the complaint. Conduit says Tether has offered no explanation for the freeze and will not lift it.

Tether and TRON run a joint enforcement arm, the T3 Financial Crime Unit, that has supported Brazilian Federal Police work. One such effort, Operation Lusocoin, helped freeze more than 3 billion reais in crypto assets, including 4.3 million USDT tied to a criminal network, Tether said in a May statement.

Who else is suing Tether? 

Conduit’s case follows a similar one filed weeks earlier in the same New York court. On August 31, Thai businessmen Nutthawat Rukthammachalern and Natthawat Kasamvilas sued Tether over about $42.4 million in USDT frozen across 10 Ethereum addresses. 

Their complaint is that Tether blacklisted the addresses on October 30, 2025, following an informal U.S. law-enforcement request. Meanwhile, a magistrate judge only signed a seizure warrant nearly four months later, on February 19.

Tether called that suit “a baseless attempt to interfere with Tether’s important work with global law enforcement, including the Department of Justice.” The company says it cooperates with more than 340 agencies across 65 countries and has helped freeze over $4.4 billion in assets linked to suspected crime.

Tether backs its reserves with interest-bearing instruments, mostly U.S. Treasuries, so a frozen wallet costs the company nothing while it keeps collecting yield. The plaintiffs argue that this creates a financial reason to freeze and hold.

In February, New York Attorney General Letitia James and Manhattan District Attorney Alvin Bragg told Congress the GENIUS Act lets stablecoin firms “profit from fraud” by keeping funds and the interest on them rather than returning money to victims.

Separately, a Senate subcommittee led by Richard Blumenthal asked the Treasury and the DOJ on September 28 to investigate Tether’s sanctions and anti-money-laundering compliance after finding that 84% of 846 Iran-linked wallets transacted almost entirely in USDT.