Tether sued over a $42.4M USDT freeze that came four months before the warrant

Two brothers from Thailand have sued Tether in the Southern District of New York over a freeze on ten Ethereum addresses holding more than $42.4 million in USDT. According to the complaint, Tether blacklisted the addresses on October 30, 2025 after an informal request from a Homeland Security Investigations agent. The seizure warrant arrived on February 19, 2026, almost four months later.

What the complaint alleges

Nutthawat Rukthammachalern and Natthawat Kasamvilas say they had no contract and no relationship with Tether, and received no notice before the freeze. The claims are conversion, trespass to chattels and unjust enrichment, and the plaintiffs are asking for declaratory relief, an injunction, damages, punitive damages and the income Tether earned on the reserves backing the frozen tokens.

“On October 30, 2025, Defendants used that power against Plaintiffs, strangers to Defendants, with whom Defendants have no contract and no relationship of any kind, freezing tens of millions of dollars of Plaintiffs' USDT contained in Plaintiffs' blockchain addresses at the informal request of a U.S. government agent, without any warrant, order, or legal process of any kind directed to Defendants, and without notice to Plaintiffs.”

— From the complaint, Southern District of New York, The Daily Hodl, 3 September 2026

Quote source: The Daily Hodl, 3 September 2026

The mechanism at the centre of the case

USDT carries a function in its contract that lets the issuer add an address to a blacklist, and tokens at that address stop moving. No court order is needed for the freeze itself, which is what makes the tool useful against theft: Tether can act while an investigation is open, and we covered how fast criminals move to get ahead of it. The same speed is what the plaintiffs are complaining about, because the tool works the same way whether the request behind it is a warrant or a phone call.

Self-custody changes nothing here. The blacklist works at the address level, so holding your own keys leaves the tokens frozen exactly as they are, and the ten addresses in this case were the plaintiffs' own.

The novel part is the money on the reserves

Frozen USDT stays backed by reserves, and those reserves earn a return. The complaint asks the court to hand that return over for the freeze period and to impose a constructive trust on it. Tether cleared its first full audit in August with a clean opinion from KPMG, so the reserve income is documented rather than theoretical, which makes this claim easier to quantify than most.

The filing raises a second question. The warrant sought to destroy the frozen USDT and reissue it to a government wallet, a routine step once a court signs off, and a step that had no court behind it for the first four months.

Untested so far

Tether has filed no public response, and none of the allegations has been tested. A court has not ruled on whether an issuer freezing tokens at an agency's informal request acts as a private company protecting its product or as an arm of the state, and that distinction is what the case turns on.

Anyone holding a stablecoin is holding a claim on an issuer that can suspend the balance. The filing describes that suspension as still running nine months on, with the money and the yield it earns both sitting on the issuer's side of the line.

None of this should be read as personalized investment advice.