Tether sued over alleged unlawful freeze of $42.4 million in USDT

Two Thai businessmen sued Tether on Monday, alleging that the stablecoin issuer froze roughly $42.4 million in USDT without legal authority.

Nutthawat Rukthammachalern and Natthawat Kasamvilas filed the complaint in the US District Court for the Southern District of New York. It names four Tether entities and concerns USDT held in ten Ethereum addresses.

According to the complaint, Tether blacklisted the addresses last October at the informal request of a Homeland Security Investigations agent, without a warrant or court order. More than three months later, a federal magistrate judge in North Carolina issued a seizure warrant detailing a plan for Tether to burn the restricted tokens, issue replacement USDT, and transfer them to a government-controlled wallet.

The plaintiffs argue that the warrant did not retroactively authorise the freeze, nor did it allow Tether to destroy the original tokens before a final forfeiture judgment.

Lawyers for Rukthammachalern and Kasamvilas did not immediately respond to a request for comment from Decrypt.

Tether controls administrative functions in the USDT smart contract that allow the company to blacklist cryptocurrency addresses across several networks, including Ethereum. Blacklisted tokens remain visible on the blockchain but cannot be transferred. Tether can also burn USDT held in those addresses.

In April, Tether said it works with more than 340 law enforcement agencies across 65 countries. Tether said the cooperation had helped freeze more than $4.4 billion in assets linked to suspected illicit activity.

"USDT is not a safe haven for illicit activity," Tether CEO Paolo Ardoino said in a statement at the time. "When credible links to sanctioned entities or criminal networks are identified, we act immediately and decisively. Recent events have shown what happens when platforms fail to act quickly, law enforcement falters, users are exposed, and trust erodes."

Rukthammachalern and Kasamvilas said they acquired the USDT in commercial transactions on the secondary market and never opened Tether accounts, bought tokens directly from the company, or agreed to its terms.

Tether did not immediately respond to a request for comment from Decrypt.

* Translated and edited with permission from Decrypt.

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