Lawsuit Says Tether Froze $42.4 Million in USDT Before Any Warrant Was Issued

Two Thai businessmen are suing Tether in federal court over about $42.4 million worth of frozen $USDT.

The stablecoin issuer froze the tokens last October based on what the complaint describes as nothing more than a verbal request from a U.S. agent. According to the lawsuit, a seizure warrant obtained almost four months later cannot legalize an unlawful freeze.

The case lands amid a broader debate over the centralized control that issuers retain over supposedly decentralized stablecoins. While stablecoins are often marketed as censorship-resistant digital dollars, most major issuers build the technical ability to freeze addresses directly into their token contracts, a power that becomes visible to holders only when it is exercised.

Blacklist affected ten Ethereum addresses

The lawsuit was filed on August 31 in the U.S. District Court for the Southern District of New York. It names Nutthawat Rukthammachalern and Natthawat Kasamvilas as plaintiffs and lists four Tether entities as defendants.

The filing says the tokens were held across ten Ethereum addresses. Nine of the addresses belong to Rukthawat Rukthammachalern's co-plaintiff structure, with one belonging to Kasamvilas.

According to the complaint, Tether blacklisted those addresses on October 30, 2025. It says a Homeland Security Investigations agent had informally requested the blacklisting without a warrant, court order, or notice to the account holders.

A federal magistrate judge in North Carolina did not issue a seizure warrant until February 19, 2026. The complaint says the warrant outlined a plan for Tether to burn the frozen $USDT, mint an equivalent amount of new tokens, and send them to a government-controlled wallet.

“Tether froze our clients’ funds following an informal government request with no warrant, no court order, no legal process directed to Tether and no notice,” Mark Beckett, counsel for the two men, said.

He added that “a warrant followed nearly four months later.” Beckett also said that Tether “has no contractual relationship with our clients, is not a custodian of our clients’ $USDT, and has no legal right or basis to blacklist our clients’ accounts.”

The lawsuit portrays Tether as a private company acting independently of any government claim. The plaintiffs are seeking a ruling that the freeze was unlawful, an order blocking the destruction of the tokens before any final forfeiture ruling, and damages.

They are also seeking the income, according to the complaint, that Tether earned while the funds remained frozen.

Complaint says reserves continued to earn Treasury yield

The complaint says that when Tether mints the stablecoin, it receives dollars and buys interest-bearing instruments, mostly U.S. Treasury securities held in New York. Those holdings are described as the reserves.

The plaintiffs argue that freezing a customer’s $USDT costs Tether nothing, while the company continues to earn yield on the reserves tied to the frozen tokens. They say this creates a financial incentive for Tether to freeze tokens and burn them.

Tether markets $USDT as stable, fully backed, and freely transferable, but does not disclose that it can block or destroy a holder’s tokens on any blockchain at will, the plaintiffs say.

In a statement, Tether said: “The new lawsuit against Tether is a baseless attempt to interfere with Tether’s important work with global law enforcement, including the Department of Justice, to prevent the unlawful use of $USDT.”

The $USDT smart contract includes blacklist functionality, which allows Tether to flag addresses on blockchains such as Ethereum. How courts weigh that built-in freeze power against holders’ due-process rights has not been definitively settled, and the outcome of this case could shape how law-enforcement requests to stablecoin issuers are handled going forward.

Tether works with more than 340 law enforcement organizations across 65 nations, Cryptopolitan reported in April. The company said that cooperation had helped freeze more than $4.4 billion in assets tied to suspected illicit activity.