Tether Faces Lawsuit Over $42.4M USDT Freeze Without Prior Warrant

Highlights:

• Two Thai businessmen sued Tether after it froze their $42.4 million in USDT before authorities obtained a warrant.
• The freeze of USDT by Tether happened nearly four months before a federal court issued the seizure warrant.
• The businessmen want Tether to unblock their USDT and stop any move to burn the tokens.

Tether, the issuer of the USDT stablecoin, is facing a New York lawsuit over its October 2025 freeze of $42.4 million in USDT. Thai businessmen Nutthawat Rukthammachalern and Natthawat Kasamvilas filed the lawsuit in New York federal court on Aug. 31. They claim Tether froze their USDT nearly four months before federal authorities obtained a seizure warrant.

Two Thai Businessmen Sue Tether for Allegedly Illegally Freezing $42.4M USDT at US Request and Transferring Funds to Government Wallet

According to attorney Ariel Givner, two Thai businessmen filed a lawsuit against Tether in the US District Court for the Southern District of… pic.twitter.com/aGzamJ7kHM

— Wu Blockchain (@WuBlockchain) September 2, 2026

The complaint stated that Tether blacklisted ten Ethereum addresses holding exactly 42,417,785.62 USDT. The businessmen claim Tether acted after a Homeland Security Investigations agent informally requested the restriction.

However, they say no warrant, subpoena, court order, or other formal legal process authorized Tether’s action. According to the complaint, Kasamvilas discovered the blacklist after an attempted USDT transaction failed. He then contacted Tether to learn why the company had stopped him from transferring the funds.

The plaintiffs say Tether provided an HSI agent’s email address but gave Kasamvilas no legal basis for the restriction. The complaint says Tether used its Ethereum contract’s addBlackList function to restrict the transfers. The function prevents holders of designated addresses from transferring their USDT.

The plaintiffs say they acquired the USDT through secondary-market business transactions rather than directly from Tether. They also say they had no direct customer relationship with the stablecoin issuer. Tether had not publicly responded to the complaint as of press time.

Court Warrant Came Nearly Four Months Later

A federal magistrate judge in North Carolina issued a seizure warrant covering the identified cryptocurrency on Feb. 19. The warrant came nearly four months after Tether allegedly blacklisted the ten Ethereum addresses. According to the complaint, the warrant outlined a process for Tether to transfer the targeted USDT to federal authorities. Under that process, Tether would burn the targeted USDT and mint an equal amount of replacement tokens. Tether would then transfer the newly minted USDT to a wallet controlled by the U.S. government.

Five days after the warrant, federal prosecutors announced a broader seizure involving more than $61 million in USDT. Investigators linked the funds to alleged pig-butchering schemes that targeted victims through fraudulent cryptocurrency investments. HSI opened the investigation after a victim reported losing funds through an alleged fraudulent cryptocurrency investment scheme. Investigators then traced the victim’s funds through several cryptocurrency wallets connected to the alleged fraud.

Authorities said those wallet transfers helped conceal the funds’ source and ownership. They also said the transactions helped hide connections to fraudulent trading platforms. The Justice Department credited Tether with helping federal authorities complete the broader $61 million cryptocurrency seizure. Tether separately acknowledged its role in the operation.

Tether Acknowledged by DOJ for Support in $61 Million Seizure Linked to Pig Butchering Fraud
Learn more: https://t.co/yp0F6oXmR5

— Tether (@tether) February 25, 2026

However, the businessmen argue that the February warrant cannot retroactively authorize Tether’s decision to blacklist their addresses four months earlier. They have also questioned whether the warrant allows Tether to burn their existing USDT and mint replacement tokens.

USDT Control Raises Questions After Tether Freeze

The plaintiffs’ claims against Tether include conversion, trespass to chattels, and unjust enrichment. They are also seeking damages if Tether destroys the disputed tokens. The businessmen want income they claim Tether earned from reserves that continued backing their frozen USDT. They also want the court to prevent Tether from burning their USDT or replacing it with newly minted tokens.

Separately, the businessmen filed an application in North Carolina on July 31 seeking the return of the disputed USDT. Neither the New York nor North Carolina proceeding has produced a final ruling on the dispute.

The case follows a separate July freeze involving cryptocurrency addresses that U.S. authorities linked to ISIS-K. On July 1, OFAC added 134 cryptocurrency addresses linked to ISIS-K to its sanctions designation. Tether froze funds across all 131 TRON addresses shortly after OFAC published the sanctions update.

Tether Freezes USDT in All 131 ISIS-K-Linked TRON Wallets

OFAC updated its sanctions list for ISIS-K, adding 134 crypto wallet identifiers, including 131 TRON addresses and three Monero addresses. Chainalysis said the TRON addresses had received more than USD 1.4 million since… pic.twitter.com/53AgCBUGKr

— Wu Blockchain (@WuBlockchain) July 2, 2026