Key Takeaways
- A group of terrorism survivors is petitioning a federal judge in Manhattan to compel Tether to release $344 million in frozen USDT
- The stablecoins are connected to Iran’s Islamic Revolutionary Guard Corps (IRGC), designated as a terrorist organization by U.S. authorities
- Lead counsel Charles Gerstein is leveraging cryptocurrency platforms’ freezing capabilities to enforce decades-old terrorism verdicts
- USDT’s centralized nature allows Tether to freeze, blacklist, and redistribute tokens — a key distinction from decentralized cryptocurrencies
- Similar legal tactics are being deployed by Gerstein in cases involving Arbitrum, KelpDAO breach funds, and Railgun DAO
A coalition of individuals holding outstanding U.S. court verdicts connected to Iranian-sponsored terror attacks has petitioned a Manhattan federal court to compel Tether to release over $344 million in immobilized USDT.
The legal petition was lodged on Thursday with the Southern District of New York. It focuses on stablecoins that Tether immobilized following the U.S. Treasury’s Office of Foreign Assets Control (OFAC) sanctioning of two Tron blockchain addresses allegedly controlled by Iran’s Islamic Revolutionary Guard Corps.
The petitioners represent both survivors and relatives of individuals killed in assaults attributed to Iranian-supported militant organizations. This includes those who survived the 1997 Hamas bombing in Jerusalem. Collectively, they possess billions in unpaid judicial awards against the Iranian government.
The coalition is requesting judicial intervention to mandate Tether to maintain the freeze and redistribute an equivalent sum — precisely 344,149,759 USDT — into a digital wallet overseen by their attorney.
Lawyer Charles Gerstein spearheads this effort. He has been systematically developing a legal framework centered on exploiting cryptocurrency platforms’ centralized control mechanisms to secure compensation for terror attack survivors.
Why Tether’s Centralization Creates a Unique Legal Opening
Unlike decentralized cryptocurrencies such as Bitcoin or Ether, USDT operates under the control of a single entity. Tether possesses the technical infrastructure to immobilize specific wallet addresses, place accounts on blacklists, and under certain circumstances, eliminate balances entirely before reissuing equivalent tokens to alternative addresses.
Gerstein’s legal position is direct: Tether has already immobilized these assets in compliance with OFAC directives. Consequently, Tether possesses both the capability — and according to the plaintiffs, the legal duty — to redirect those assets to the judgment holders.
This scenario differs significantly from disputes involving stolen cryptocurrency, where rightful ownership often remains contested. In this instance, OFAC has formally identified the wallets as property of the IRGC, which the U.S. government officially recognizes as a state terrorism sponsor.
The petitioners contend this designation transforms the frozen USDT into “blocked property” belonging to a terrorist entity, thereby making it eligible for confiscation under federal statutes.
An Expanding Legal Campaign Across Crypto Platforms
This marks not Gerstein’s inaugural effort to enforce terrorism judgments through cryptocurrency channels. He’s simultaneously pursuing litigation concerning frozen assets on Arbitrum connected to the KelpDAO security breach, which bears links to North Korea’s notorious Lazarus Group.
In that proceeding, Gerstein asserted that Ether frozen following the hack represented North Korean state property. That legal argument faces greater complexity, as the platform Aave disputed whether stolen cryptocurrency ever legitimately became the perpetrators’ lawful property.
The Tether case, Gerstein maintains, presents fewer complications. The ownership determination has essentially been resolved through OFAC’s official designation.
He’s additionally pursuing separate litigation against privacy-focused protocol Railgun DAO employing comparable legal reasoning.
The overarching legal principle being tested is whether courts can compel crypto infrastructure providers that possess the ability to freeze sanctioned assets to additionally redirect those same assets to victims holding valid court judgments.
As of this filing, no judicial determination has been rendered. The matter remains under consideration in the Southern District of New York.
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