Key Insights:
- According to the lawsuit, the firm Tether has the authority to freeze USDT without judicial approval.
- A subsequent order from a seizure warrant directed Tether to destroy the allegedly infringed-upon tokens and reissue them.
- The case could influence how stablecoin issuers respond to informal government requests.
Tether faces a lawsuit from two Thai businessmen over roughly $42.4 million in USDT frozen before authorities obtained a seizure warrant. The case, filed in New York, could test whether stablecoin issuers can restrict secondary-market tokens without prior judicial approval.
Nutthawat Rukthammachalern and Natthawat Kasamvilas filed the complaint on Aug. 31. They accuse Tether of restricting their Ethereum addresses after an informal request from Homeland Security Investigations. The allegations remain unproven, and Tether had not filed a public response as of Sept. 2.
Tether has just been sued over a $42.4 million USDT freeze by Two Thai businessmen in the SDNY.
Nutthawat Rukthammachalern and Natthawat Kasamvilas say Tether blacklisted their wallets on October 30, 2025 (42,417,785.62 USDT) after an informal request from an HSI agent.
No… pic.twitter.com/hDDgMZRrIv
— Ariel Givner (@GivnerAriel) September 1, 2026
The freeze came before judicial action
According to the complaint, Tether blocked ten Ethereum addresses on Oct. 30, 2025. Those wallets contained 42,417,785.62 USDT at the time. The plaintiffs claim an HSI agent requested the freeze informally. They say authorities had not obtained a warrant or court order directed at Tether.
One plaintiff later contacted Tether after discovering the restriction. The complaint alleges that the company referred him to an HSI special agent instead of explaining the freeze.
The dispute centers on Tether’s technical ability to restrict USDT. It has a smart contract on the Ethereum blockchain that provides a function for blacklisting addresses and functions for destroying the frozen tokens.
The technical control was not, however, a legal basis for ownership, the plaintiffs contend. They say they acquired the USDT through secondary-market transactions and lacked a direct contractual relationship with Tether.
The complaint therefore challenges the legal basis for freezing assets held by third parties.
A federal warrant changed the dispute
The situation developed further on Feb. 19, 2026. The U.S. Attorney’s Office for the Eastern District of North Carolina secured a seizure warrant. The warrant reportedly directed Tether International to burn the identified USDT. It also instructed the company to mint equivalent tokens into a government-controlled wallet.
Five days later, federal prosecutors announced the seizure of more than $61 million in USDT. Investigators linked the broader wallet activity to cryptocurrency investment scams. Authorities said the investigation began after a victim provided information to HSI Raleigh. Agents then traced transactions through multiple wallets.
The Justice Department credited Tether for helping transfer the assets. Tether also acknowledged its cooperation with authorities in the broader recovery.
Nevertheless, the plaintiffs argue that the later warrant could not retroactively authorize the October freeze. They also dispute whether the warrant provides sufficient authority for burning and reissuing their tokens. The New York complaint treats the federal investigation as background. It does not establish that the plaintiffs themselves committed fraud.
Stablecoin controls face a legal test
The lawsuit puts Tether’s compliance powers under scrutiny. Stablecoin issuers can use smart-contract controls to restrict tokens associated with suspected illicit activity.
Tether has repeatedly worked with law enforcement agencies worldwide. Such cooperation can help authorities recover assets from fraud, theft and money laundering investigations.
Yet this case raises a narrower question about timing and legal authority. Plaintiffs allege that they should not be prohibited from using privately-owned assets based on an informal request from the government.
They also claim that Tether sold off profitably the USDT reserves. Hence, they have an unfair enrichment cause in their grievance.
The plaintiffs are asking for various remedies.
- A statement that the freeze was not authorized by law.
- A court ruling which prohibits burning of controversial tokens.
- Compensatory and punitive damages.
- Disgorgement of income allegedly earned from reserve assets.
The result may have implications for compliance in the stablecoin space in general. Issuers may be under further pressure to create new protocols to respond to law enforcement requests.
The next step could shape the standards in the industry.
Another notable point is that Tether is one of the top stablecoin issuers. The company has an important role to play in law enforcement in its capacity to freeze tokens, too.
At the same time, that power creates legal questions for legitimate holders. A court ruling could clarify how far an issuer’s contractual and technical powers extend. The plaintiffs have also sought relief through proceedings in North Carolina. They told the New York court that they separately sought the return of their USDT.
No court has yet ruled on the legality of the freeze or the subsequent token transfer. Tether also had not publicly answered the New York complaint by Sept. 2.
For Tether, the dispute now goes beyond the $42.4 million at issue. The case could determine how stablecoin companies balance regulatory cooperation with property rights and judicial oversight.
Conclusion
Tether is currently under legal scrutiny to determine if it is allowed to hold $42.4 million worth of USDT without court order. Plaintiffs contend that the subsequent seizure warrant cannot be used to justify the earlier restriction.
The outcome of those claims could prove to be a significant precedent for stablecoin issuers. It could also establish the interaction between the digital asset controls and the traditional government seizure requirements.
