Conduit Sues Tether Over $2.76 Million USDT Freeze as Legal Challenges Mount

Conduit, a cross-border payments company, has filed a lawsuit against Tether over the freezing of $2.76 million in USDT, an action the firm says has locked up its main operating account for more than a year. The case lands amid mounting scrutiny of the stablecoin issuer's wallet-freezing practices, as companies and individuals increasingly take their disputes over frozen assets to court.

The Lawsuit

The complaint was filed in the U.S. District Court for the Southern District of New York on October 5. It names four Tether entities as defendants: Tether Holdings, Tether International, Tether Operations, and Tether Investments. Conduit is represented by the law firm Baker Botts.

Conduit moves money across more than 100 countries using stablecoins such as USDT and Circle's USDC. According to the filing, the wallet Tether froze functioned as the company's operating bank account, meaning the freeze has hurt its business. While the funds remain locked, Tether continues to earn 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 is seeking the release of the $2.76 million and is asking for an additional $2.76 million to cover damages along with the profits it says Tether earned on the reserves.

At the center of the dispute is whether Tether had grounds to freeze Conduit's wallet even though, according to the complaint, the wallet was not flagged by law enforcement and did not hold funds belonging to the company at the center of the Brazilian case. The lawsuit also places the financial consequences of a prolonged freeze—the loss of access to operating funds and the continued accrual of reserve income—before the court.

The Origins of the Freeze

The freeze traces back to a case referred to Brazil's Federal Police involving Onix Intermediações, a company Conduit once served. Conduit's filing points out that law enforcement confirmed it never flagged Conduit's treasury wallet. In addition, a Brazilian court found that Conduit was not under investigation in the Onix matter.

According to the complaint, 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 funds. Conduit says Tether has offered no explanation for the freeze and will not lift it.

Tether and TRON operate a joint enforcement arm, the T3 Financial Crime Unit, which has supported work by the Brazilian Federal Police. 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.

Other Legal Challenges

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

Their complaint states that Tether blacklisted the addresses on October 30, 2025, following an informal U.S. law-enforcement request. A magistrate judge, meanwhile, did not sign a seizure warrant until February 19, nearly four months later.

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.

The Yield Question

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 Department Justice 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.