Tether sued over alleged unlawful $42.4M USDT freeze

Two Thai businessmen have filed a lawsuit in the U.S. District Court for the Southern District of New York, challenging Tether Ltd.'s authority to freeze approximately 42.4 million USDT before a seizure warrant was issued.

Background of the freeze

The plaintiffs, Nutthawat Rukthammachalern and Natthawat Kasamvilas, allege that Tether used its smart‑contract functions to blacklist ten Ethereum addresses holding exactly 42,417,785.62 USDT on October 30, 2025. They claim the action was taken after an informal request from a Homeland Security Investigations (HSI) agent and without a warrant, court order, subpoena, or other formal legal process.

Subsequent seizure warrant

On February 19, 2026, a magistrate judge in the Eastern District of North Carolina issued a seizure warrant directing Tether to burn the USDT at the identified addresses, mint an equivalent amount, and transfer the replacement tokens to a government‑controlled wallet. Federal prosecutors later announced the seizure of more than $61 million in USDT linked to alleged investment fraud schemes.

Legal claims

The complaint seeks declaratory relief, an injunction to prevent Tether from burning the disputed tokens, damages, disgorgement of reserve income, and punitive damages. Claims include conversion, trespass to chattels, and unjust enrichment.

Implications for stablecoin issuers

The case raises questions about whether a private stablecoin issuer may restrict secondary‑market tokens based on an informal law‑enforcement request and whether a later warrant can retroactively validate an earlier freeze.

Current status

Tether has not filed a public response as of September 2, 2026. The next procedural steps include service of the complaint and potential motions for an early injunction.