Cross-border payments firm Conduit Technology has sued Tether, alleging that the stablecoin issuer froze $2.76 million in USDT belonging to the company without legal justification. The case was filed in the U.S. District Court for the Southern District of New York on Oct. 5.

According to the complaint, Tether blocked Conduit's treasury wallet on Sept. 24, 2025, and the funds have remained inaccessible for more than a year. Conduit says the wallet held its own working capital and had no connection to the Brazilian investigation that it believes prompted the freeze. The case puts renewed attention on Tether's ability to restrict USDT held in external wallets. USDT is the largest stablecoin by market capitalization and is widely used to move money across borders, so an issuer-side freeze can immediately disrupt the payment operations of businesses that hold it as working capital.

Brazilian investigation drives the dispute

Conduit says the freeze is tied to a Brazilian Federal Police investigation involving other companies, including Onix Intermediações. The company argues, however, that its wallet has no connection to those entities.

Per the complaint, Brazilian authorities supplied Tether with cryptocurrency addresses linked to the investigation. Conduit says its treasury wallet was not among them and that Brazilian authorities later confirmed they had not identified the wallet for freezing. The company further states that the disputed wallet was created after Onix's last transaction through its platform and never held Onix funds.

Conduit alleges that Tether's own financial-crime unit identified the wallet using undisclosed criteria. The firm says the freeze disrupted its ability to pre-fund and settle international payments.

Broader scrutiny of Tether's freeze authority

In its suit, Conduit is seeking restoration of access to the $2.76 million, along with at least $2.76 million in damages. It is also asking for compensation for alleged business losses and an accounting of income generated from reserves backing the frozen USDT.

The case arrives as regulators and financial institutions continue to examine stablecoins and their role in cross-border payments and financial-crime controls. Tether has previously exercised its ability to freeze USDT in response to investigations and suspected illicit activity — a power it can carry out by blacklisting wallet addresses, which leaves the tokens immobile wherever they sit. The Conduit lawsuit raises a different question: how far that power extends when the issuer acts without a direct court order involving the wallet holder. Where the line falls between issuers' financial-crime controls and holders' access to their own tokens remains unsettled across the stablecoin sector, and this case gives that boundary a concrete test in court.

The allegations remain unproven, and the court has not ruled on whether Tether acted unlawfully. Tether had not publicly responded to the lawsuit at the time of reporting. With the litigation in its early stages, Tether's formal response in court will be a key development to watch. The complaint was detailed in Cointelegraph's report.