Conduit's Tether Lawsuit Explained: Can Tether Freeze Your USDT Without a Court Order?

Conduit Technology, a stablecoin payments company, sued Tether on October 5, 2026, in federal court in New York over $2.76 million in USDT that’s been frozen in its treasury wallet for more than a year. Conduit says the freeze didn’t come from a warrant, a court order, or even a confirmed law-enforcement request — and that Tether has no legal right to keep the money. It’s the second major lawsuit this year accusing Tether of freezing user funds without the legal authority it claims to rely on.

What Conduit actually alleges

Conduit filed its complaint in the U.S. District Court for the Southern District of New York, naming several Tether entities — including Tether Holdings, Tether International, Tether Operations, and Tether Investments S.A. de C.V. — as defendants (The Block, Decrypt).

According to the complaint, Tether froze about $2.76 million in USDT sitting in Conduit’s own treasury wallet — not a customer’s wallet — and has kept it locked for over a year. Conduit traces the freeze to an investigation Brazilian authorities were running into Onix Intermediações, a company that used to be a Conduit customer. The problem, Conduit says, is that Brazilian law enforcement itself confirmed it never flagged Conduit’s treasury wallet for freezing. Instead, Conduit attributes the freeze to Tether’s own T3 Financial Crime Unit, which it alleges acted on its own initiative, without authority and without identifying any actual compliance issue tied to Conduit (Decrypt, Bitcoin.com News).

Conduit is asking the court for the funds back plus damages, and the complaint lists a long set of legal claims: conversion, unjust enrichment, breach of fiduciary duty, computer fraud, a declaratory judgment, an accounting, and punitive damages, restitution, and disgorgement of any profit Tether made holding the funds (Protos). As of the initial reporting, Tether hadn’t publicly responded, and none of Conduit’s claims have been tested in court — this is a one-sided complaint at the earliest possible stage.

Who Conduit is, and why its own treasury got frozen

Conduit isn’t a random USDT holder. It’s a Boston-based cross-border payments platform that moves money for businesses — payroll platforms, exporters, importers, marketplaces — by converting local currency into stablecoins, routing it across borders in minutes, and converting it back on the other end, instead of relying on traditional correspondent banking. The company has said its stablecoin transaction volume grew roughly 16x in 2024 to more than $10 billion a year, and it’s raised $36 million in Series A funding to expand further into Latin America, Africa, and Asia.

That context matters for the lawsuit: the frozen $2.76 million wasn’t sitting in some customer’s wallet that Conduit merely processed a transaction for. Conduit says it’s the company’s own treasury wallet — money it needs to run its actual payments business — which is precisely why a year-long freeze, with no clear resolution path, is serious enough to sue over rather than wait out.

How Tether’s freeze power actually works

USDT isn’t like cash sitting in a bank vault. It’s a token governed by a smart contract that Tether controls, and that contract includes a built-in blacklist function — Tether can add any wallet address to that list, and once it does, USDT in that address becomes unmovable. Tether’s terms of service explicitly reserve this right, and the company has used it increasingly often as stablecoins have scaled.

Tether usually frames freezes as cooperation with law enforcement, sanctions enforcement, or its T3 Financial Crime Unit — a group Tether formed in September 2024 together with the Tron blockchain and blockchain-analytics firm TRM Labs specifically to track and freeze USDT tied to suspected crime on Tron, where a large share of USDT circulates (TRM Labs). In that arrangement, TRM supplies blockchain intelligence, Tron provides technical access, and Tether’s own investigations team decides whether to execute a freeze — meaning the decision to freeze funds, in practice, is made by a private company, not a judge.

Tether’s freezes, by the numbers

Freeze action	Reported amount	Stated reason	Source
January 2026	~$182 million (5 Tron addresses)	Formal law enforcement request	The Block
April 2026	~$344 million (2 Tron addresses)	Coordinated with OFAC and U.S. authorities	The Block
September 2026 (Tether statement)	~$550 million	Wallets linked to Iran’s sanctioned network	Single-source report, unconfirmed independently
3-year cumulative (as of Feb 2026)	~$4.2 billion	Combined illicit-activity freezes since 2023	Tether’s own disclosure
Conduit’s treasury wallet	$2.76 million	Disputed — Conduit says no valid legal basis	Conduit’s October 2026 complaint
Thai plaintiffs’ wallets	$42.4 million	Informal HSI request, later followed by a warrant	Decrypt, Cointelegraph

Tether has said publicly that its freezes have supported more than 2,900 investigations worldwide, over 1,600 of them involving U.S. law enforcement. Separately, blockchain-analytics firm BlockSec found that of about $1.26 billion in USDT Tether blacklisted across 2025, roughly $698 million was later permanently destroyed through the contract’s burn function rather than returned to anyone — and reversals of a freeze, once issued, are uncommon.

This isn’t the first time Tether’s freeze power has ended up in court

Conduit’s case closely echoes one filed just weeks earlier. In late August 2026, two Thai businessmen — Nutthawat Rukthammachalern and Natthawat Kasamvilas — sued Tether in the same federal court, also in the Southern District of New York, after Tether blacklisted about $42.4 million in USDT across ten Ethereum addresses (Decrypt, Cointelegraph).

That complaint says Tether froze the wallets the prior October at the informal request of a single Homeland Security Investigations agent — with no warrant and no court order. A real seizure warrant for the same funds didn’t arrive until February 2026, months later, tied to a $61 million “pig butchering” romance-scam investigation in the Eastern District of North Carolina. The plaintiffs don’t deny involvement in the underlying scam, but argue they bought the USDT on the open market, aren’t Tether’s customers, and that Tether had no legal authority to freeze the funds months before any warrant existed.

Together, the two cases raise the same core legal question: does Tether have the right to freeze USDT purely on its own judgment, before any court or warrant says it should — and if it gets that judgment wrong, what recourse does the person whose money got frozen actually have? Neither case has been decided, but legal observers have flagged the Thai case in particular as a potential precedent for where a stablecoin issuer’s private freeze power ends and a holder’s property rights begin.

What this means if you hold USDT

Here’s the practical takeaway, separate from who wins these lawsuits: USDT is not neutral, bearer-style digital cash the way physical cash or even Bitcoin in your own wallet is. It’s backed by a company that has, by its own account, frozen roughly $4.2 billion worth of tokens over three years and reserves the contractual right to freeze any address, including yours, based on its own internal judgment about risk — sometimes before any law enforcement agency has weighed in at all.

That doesn’t mean USDT is unsafe to use for everyday purposes, and it isn’t unique — Circle, which issues the competing USDC stablecoin, maintains a similar blacklist function and has frozen addresses tied to sanctions and hacks. But it does mean a frozen balance is a real, if rare, risk for anyone — a business, an exchange, an individual trader — holding meaningful amounts of any centralized stablecoin, and that getting funds back once frozen can mean a year or more in legal limbo, as Conduit’s case shows. If you’re holding stablecoins as a cash equivalent for a business or as a large share of your savings, that’s a risk worth weighing against the convenience, not a reason for panic.

This is not financial, legal, or tax advice — stablecoin freeze policy and the legal boundaries around it are genuinely unsettled right now, and anyone with meaningful stablecoin exposure, personal or business, should do their own research and talk to a qualified professional about their specific situation.

For more on how control over your crypto works more broadly, see our explainers on the SEC’s new crypto custody rule and how the Bitget hack happened without a stolen private key.