TLDR
- A federal lawsuit was initiated against Tether by two Thai business owners in New York on August 31, 2026, challenging a $42.4 million USDT asset freeze
- Ten Ethereum wallet addresses were reportedly blacklisted by Tether on October 30, 2025, following an unofficial communication from a Homeland Security Investigations official
- The freeze was executed without any warrant, judicial order, or official legal documentation
- Authorities issued a seizure warrant in February 2026, months after the initial freeze, directing Tether to destroy the frozen tokens and create new ones for a government-controlled address
- The lawsuit demands compensation, a court injunction, and recovery of profits Tether generated from reserve assets supporting the frozen digital currency
Tether is facing legal action in New York federal court from two Thai entrepreneurs who allege the company froze $42.4 million worth of USDT tokens without proper legal authority.
The legal filing was submitted on August 31, 2026, to the U.S. District Court for the Southern District of New York. The individuals bringing the case are Nutthawat Rukthammachalern and Natthawat Kasamvilas.
The Asset Freeze
The lawsuit alleges that on October 30, 2025, Tether placed ten Ethereum wallet addresses containing 42,417,785.62 USDT on a blacklist. This action reportedly followed an unofficial communication from an agent with Homeland Security Investigations.
No formal legal documentationāincluding warrants, judicial orders, or subpoenasāauthorized Tether’s actions at the time of the freeze. The individuals claim they were never notified in advance.
After one plaintiff contacted Tether via email seeking clarification on the frozen assets, the company allegedly responded by providing only the contact information of an HSI agent, without offering any legal justification for the action.
The freeze was implemented using Tether’s Ethereum smart contract function labeled addBlackList, which blocks specific addresses. Another function, destroyBlackFunds, enables the permanent elimination of blacklisted tokens.
The plaintiffs maintain they acquired the tokens through secondary market transactions and had no direct contractual relationship with Tether. They contend that Tether’s technical control over the smart contract doesn’t grant it legal jurisdiction over tokens in third-party possession.
The Legal Warrant and Asset Seizure
Over three months following the initial freeze, a magistrate judge in North Carolina granted a seizure warrant on February 19, 2026. The warrant allegedly ordered Tether to eliminate the frozen USDT and create replacement tokens in a wallet controlled by federal authorities.
Federal prosecutors announced the seizure of over $61 million in USDT five days following the warrant issuance. Law enforcement officials indicated the assets were connected to cryptocurrency wallets involved in pig butchering fraud schemes.
The Department of Justice publicly acknowledged Tether‘s cooperation in facilitating the asset transfer. Tether released its own statement on February 25, 2026, verifying its participation in the law enforcement operation.
The complainants argue that the February warrant cannot legally validate the October freeze retroactively. They also question whether a seizure warrant authorizes token destruction prior to a final forfeiture ruling.
At the time the lawsuit was filed, the plaintiffs state their specific 42.4 million USDT holdings remained in frozen status and had not been transferred to government control.
The complaint presents multiple legal claims including conversion, trespass to chattels, and unjust enrichment. The plaintiffs assert that Tether continued earning returns on reserve assets backing the frozen tokens throughout the entire freeze period.
They are requesting the court compel Tether to remove the blacklist designation, prevent any planned token burning, provide financial compensation, and surrender profits generated from the frozen assets.
Tether has not submitted a public legal response. No judicial decisions have been issued regarding the freeze, the warrant’s validity, or the injunction request.
The plaintiffs additionally submitted a separate petition in North Carolina on July 31, requesting the return of their digital assets. Neither legal proceeding has resulted in a determination regarding ownership or forfeiture.
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