Key Points
- Charles Gerstein filed a motion in Manhattan federal court seeking to compel Tether to redirect $344 million in frozen USDT.
- The motion represents terrorism judgment creditors with unpaid awards stemming from Iranian-backed attacks.
- OFAC identified two Tron blockchain addresses as belonging to Iran’s Islamic Revolutionary Guard Corps.
- Tether immobilized 344,149,759 USDT stored in the sanctioned addresses.
- Creditors request Tether reissue the frozen tokens to a wallet under their attorney’s control.
Terrorism judgment creditors have petitioned a Manhattan federal court to compel Tether to redirect $344 million in frozen USDT. The legal action focuses on tokens held in addresses that OFAC identified as belonging to Iran’s Islamic Revolutionary Guard Corps. Charles Gerstein submitted the motion to the Southern District of New York this past Thursday.
Legal Push Targets $344 Million in Immobilized Tether Tokens
The creditors aim to gain control of 344,149,759 USDT that Tether immobilized following OFAC sanctions. Their petition asks the court to instruct Tether to mint equivalent tokens and send them to a wallet managed by their legal representative. Gerstein contends that since Tether has already disabled the tokens, the company possesses the capability to execute a transfer.
According to his court filing, Tether “maintains the technical capacity to destroy and recreate the restricted tokens.” He asserts that federal statutes permit judgment holders to execute against frozen assets belonging to designated state sponsors of terrorism. The creditor group includes relatives connected to the 1997 Hamas attack in Jerusalem.
These families possess billions of dollars in outstanding U.S. court judgments against Iran. Despite these rulings, they have faced persistent challenges collecting payment for many years. Gerstein currently attempts to leverage cryptocurrency infrastructure to enforce these legal decisions.
Tether differs from Bitcoin and Ether because the issuer maintains the ability to freeze or blacklist specific addresses. The company can also eliminate balances and generate new tokens under particular circumstances. Consequently, the creditors maintain that judicial intervention can mandate a transfer.
OFAC designated two addresses on the Tron blockchain as connected to the IRGC. Tether subsequently froze the tokens residing in those addresses. The creditors contend that this enforcement action establishes the assets as blocked property under federal law.
Legal Approach Extends Beyond Previous Arbitrum Action
Gerstein previously pursued frozen cryptocurrency in a North Korea-related matter involving Arbitrum. That litigation centered on assets connected to the KelpDAO hack and restaked ether. He maintained that Lazarus-affiliated hackers temporarily possessed control of the compromised assets.
Aave disputed that assertion and maintained that the hackers never obtained legitimate ownership of the stolen assets. The controversy generated debate surrounding theft, fraud, and legal title transfer. The Arbitrum litigation continues without resolution.
By comparison, Gerstein characterizes the Tether matter as more straightforward. OFAC has formally designated the Tron addresses as IRGC property. He maintains that this official designation provides grounds for execution under federal terrorism statutes.
He stated in his filing that when cryptocurrency platforms possess the ability to freeze sanctioned holdings, courts maintain authority to mandate their transfer to judgment creditors. The legal submission portrays Tether as a controllable intermediary operating within the digital currency ecosystem. The court has yet to issue a decision on the petition.
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