Tether Faces $42.4M Lawsuit Over USDT Freeze Requested by US Investigators
Two Thai businessmen have filed a lawsuit against Tether in the U.S. District Court for the Southern District of New York, challenging the company’s freeze of $42.4 million in USDT. The plaintiffs, brothers Nutthawat Rukthammachalern and Natthawat Kasamvilas, allege that Tether blacklisted 10 Ethereum addresses holding 42,417,785.62 USDT on October 30, 2025, following an informal request from U.S. Homeland Security Investigations (HSI).
According to attorney Ariel Givner, who is representing the brothers, the freeze was executed without a warrant, court order, subpoena, or prior notice. The complaint states that Kasamvilas only discovered the restriction when he attempted to move the funds and was directed by Tether to an HSI email address for answers.
Also read: Solana Confirms September 9 Transaction V1 Upgrade, Alpenglow Set for October
The Pig-Butchering Investigation and the February Warrant
The case stems from a North Carolina investigation into an alleged pig-butchering scam, a type of romance-and-investment fraud. The investigation began after a victim reported losing money to a scheme that originated on a dating app. The brothers claim they received the USDT through legitimate business transactions and are not direct customers of Tether.
A federal court in North Carolina issued a seizure warrant on February 19, 2026, which instructed Tether to burn the frozen USDT and reissue the same amount into a government-controlled wallet. Five days later, authorities announced they had seized more than $61 million in USDT linked to pig-butchering scams, publicly thanking Tether for its assistance in the transfer.
Also read: Vietnam Crypto Market Advances as Five Firms Pass Initial Exchange Review
The plaintiffs argue that the February warrant cannot retroactively legitimize Tether’s October freeze. Their legal team also questions whether a warrant can lawfully compel a private company to burn and reissue tokens that are not its own property.
Legal Questions Around Stablecoin Blacklisting
This lawsuit raises a broader question that has circulated in crypto legal circles for years: can a stablecoin issuer legally block, burn, or reissue privately held tokens based on an informal government request? Tether’s terms of service grant it the technical ability to blacklist addresses, but the plaintiffs argue that technical capability does not confer ownership rights over tokens held by others.
The complaint does not ask the court to halt the government’s fraud investigation. Instead, it focuses narrowly on Tether’s handling of the wallets. The brothers are seeking an injunction to prevent Tether from burning the disputed USDT, a court order to unblacklist their wallets, and damages—including income they claim Tether earned from the reserves backing the frozen tokens.
The case touches on a tension that has defined stablecoin regulation: the balance between law enforcement cooperation and user property rights. If the court rules against Tether, it could set a precedent requiring issuers to obtain judicial authorization before freezing assets, even when responding to federal requests.
What Happens Next in the Case
The lawsuit is in its early stages, and none of the plaintiffs’ allegations have been proven in court. The next major step will likely be Tether’s formal response to the complaint. The court may also consider a preliminary injunction if the plaintiffs move for immediate protection against the burning or reissuance of the disputed tokens.
The outcome could have implications beyond this single case. Stablecoin issuers have routinely cooperated with law enforcement requests to freeze funds linked to hacks, scams, and sanctions violations. A ruling that limits that cooperation to cases with prior judicial approval would change how the industry handles such requests.
For now, the brothers’ legal team is focused on preserving the frozen assets. Whether the court will grant an injunction before Tether files its response remains the key near-term question for observers tracking the case.
