Tether is facing renewed scrutiny from US Senate investigators after Democratic staff found heavy Iran-linked USDT use across hundreds of sanctioned wallets tied to Iran and regional groups. The findings, published on September 28, place Iran-linked USDT activity under fresh examination as US sanctions enforcement expands. USDT is the world's largest stablecoin by market value, giving the findings significance across the broader crypto market.

Senate Report Examines 846 Sanctioned Wallets

The minority staff of the Senate Permanent Subcommittee on Investigations, composed of Democrats, published its initial report on September 28. The review, released via the subcommittee's website, examined 846 wallets that had been sanctioned by US and Israeli authorities or flagged for confiscation due to ties to Iran and other groups.

Senate investigation finds Iran heavily relied on Tether's USDT to bypass US sanctions. A Senate investigation found that 84% of more than 800 Iran-linked sanctioned crypto wallets used Tether's stablecoin, WSJ reports. pic.twitter.com/vDzygiRJ5f — Resist the Mainstream (@ResisttheMS) September 28, 2026

According to the report, 84% of the wallets reviewed were found to have traded only or mostly in USDT. Investigators described the stablecoin as playing a significant role in Iran's underground banking system.

What Did Senate Investigators Find About Iran-Linked USDT?

The analysis drew on blockchain data records spanning more than five years. The wallets had been identified by the US Treasury Department's Office of Foreign Assets Control (OFAC) and by Israel's National Bureau for Counterterrorism Financing.

Among the 757 wallets found by the Israeli agency, 87% transacted more than 80% of their value in USDT, a concentration that investigators said showed Iran-linked USDT dominated that portion of the database.

The study also considered 101 OFAC-designated wallets associated with Iran or Iranian groups. Investigators found that 57% of them mostly utilized USDT, with Bitcoin the second-most-used cryptocurrency.

Two sanctioned Iranian individuals stood out in the report: addresses believed to belong to Alireza Derakhshan and Arash Estaki Alivand received more than $603 million in USDT between 2021 and 2025.

Tether Disputes the Senate Findings

Tether disagreed with the report's description of its compliance history. According to CEO Paolo Ardoino, USDT is not a haven for sanctioned entities, terrorists, or criminals.

The company pointed to 2026 enforcement actions involving Iran-related USDT, stating that the measures accounted for roughly $550 million in asset freezes tied to Iranian networks. In, Tether froze more than $344 million across two wallets after receiving data from the United States; the addresses were later designated by OFAC as digital currency identifiers tied to the Central Bank of Iran, listings that prohibit US persons from transacting with the addresses. In a further action in July, Tether froze almost $131 million on four additional Tron wallets that US authorities linked to Iran's central bank.

Chainalysis independently examined the July addresses and found the wallets held around $165 million worth of stablecoins, of which about $131 million remained at the time of freezing.

Why Are Investigators Questioning Tether's Wallet Freezes?

The report also examined the speed with which Tether blacklisted specific wallets. The company can blacklist USDT at particular addresses, preventing the movement of those tokens even though the underlying blockchain continues to operate. That structure makes the issuer's response time a central measure of sanctions compliance, since a freeze takes effect only once the company acts.

Investigators highlighted 39 wallets detected in Israel in June 2023 and associated with Hezbollah-affiliated financier Tawfiq Muhammad Sa'id Al-Law. Five were blacklisted initially, while the remaining 34 were frozen in March 2024. According to the report, more than $34.6 million in USDT moved out of these wallets after the Israeli seizure notice.

Tether provided a different account of its performance. The company said it has assisted in more than 2,900 investigations globally, including 1,600 connected to US law enforcement efforts, and has helped freeze more than $4.9 billion across multiple investigations. It also highlighted its collaboration with OFAC, the Justice Department, the FBI, the Secret Service, and Homeland Security Investigations.

When Did US Scrutiny of Iran-Linked Crypto Increase?

Federal agency investigations into Iranian crypto networks grew throughout 2026. In May, the Financial Crimes Enforcement Network (FinCEN) alerted financial companies to the possible use of stablecoins, citing their liquidity, efficiency, and stable dollar value — properties shared by USDT, the token that dominated the subcommittee's wallet data. The Treasury Department imposed additional sanctions on digital asset businesses in Iran during 2026, attracting greater attention to Iran-linked USDT transactions conducted through exchanges, peer-to-peer platforms, and other intermediaries.

On-chain analytics firms also documented the activity. TRM Labs tracked more than $6.3 billion in transactions through Shelbit from May 2024 to March 2026, with the majority taking place through Tron and dollar-linked stablecoins. Elliptic noted significant USDT transactions through addresses designated by the Israeli government as related to the IRGC, while cautioning that those addresses may have been owned by service providers managing customer transactions.

Where Does the Senate Inquiry Go Next?

Sen. Richard Blumenthal delivered the Senate report to Treasury Secretary Scott Bessent and Attorney General Todd Blanche on September 28, asking them to examine Tether's anti-money-laundering and sanctions compliance. The request followed a previous one made in June regarding the freezing of wallets, sanctioned exchanges, and Tether's views on its US obligations. According to the Senate report, Tether confirmed the request but had yet to respond before the September 28 report was issued. The immediate items to watch are a Tether response to the June request and any action by Treasury or the Justice Department in response to the report.

The findings place Iran-linked USDT at the core of an enforcement dispute. Senate investigators are pressing questions about the timing of wallet freezes, even as the company blocked billions of dollars worth of assets during 2026.