Cross-border payments company Conduit Technology has sued Tether, the issuer of the USDT stablecoin, alleging that the stablecoin issuer froze $2.76 million of its USDT without justification and has refused to release the funds for more than a year. Conduit is seeking the release of the funds as well as at least $2.76 million in damages.

Freeze Tied to Brazilian Investigation

In a complaint filed in a U.S. federal court in New York, Conduit said Tether froze its treasury wallet in September 2025 in connection with a Brazilian police investigation involving Onix Intermediações, a former Conduit customer.

According to the company, Brazilian authorities did not identify its wallet for freezing, and the frozen funds were solely its own working capital. The frozen balance has remained inaccessible to the company since September 2025, according to the complaint. On Conduit's telling, operational capital tied to no flagged wallet has been caught up in an investigation centered on a third party.

Conduit's Network and Scale

Conduit said its platform recorded 16x transaction volume growth in 2024, surpassing $10 billion in annualized volume. The company's network now spans 14 currencies and more than 20 banking partners across nine countries, including the U.S., Mexico, Brazil, Nigeria, and Kenya. The figures frame what Conduit says is at stake: working capital behind a payments network that operates across nine countries.

Wider Scrutiny of USDT Freezes

The lawsuit adds to growing legal scrutiny of Tether's ability to freeze USDT in response to law-enforcement investigations. Tether, like other centralized stablecoin issuers, can blacklist wallet addresses and immobilize USDT balances, a mechanism it uses to comply with sanctions and law-enforcement requests. Conduit's case probes the edge of that power: the company alleges a wallet was immobilized even though the investigating authorities had not identified it for freezing.

In a separate case, two Thai nationals are challenging the freezing of $42.4 million in USDT, which followed an "informal request" from U.S. Homeland Security Investigations. Tether has previously deployed its freeze capability in large enforcement-related actions, including a voluntary $225 million freeze of stolen USDT that was described as the largest freeze of the stablecoin in history.

Together, the disputes highlight the structural tension of centralized stablecoins: the same blacklist function that lets issuers meet sanctions and law-enforcement obligations also gives a single company direct control over user balances. Conduit is now asking a U.S. federal court to order the release of funds it says were frozen without justification.

Source: BitcoinKE