Tether Faces Lawsuit Over $42.4M USDT Freeze Without Court Order

What happened: Two Thai businessmen filed suit in the U.S. District Court for the Southern District of New York, alleging Tether froze $42.4 million in USDT across 10 Ethereum addresses on October 30, 2025. The freeze reportedly followed a verbal request from a Homeland Security Investigations (HSI) agent, months before any court order was issued. A federal magistrate judge only authorized the seizure and burn of the USDT on February 19, 2026—nearly four months after the initial freeze. Tether maintains the action was lawful and in cooperation with global law enforcement.

Why it matters: The lawsuit challenges the authority of Tether to freeze and burn assets without prior legal process, especially when the affected parties claim they never agreed to Tether's terms or opened accounts directly. The case highlights the growing tension between stablecoin issuers' compliance with law enforcement and user rights, particularly as Tether's blacklist function has become a de facto tool for authorities. The outcome could set precedent for how off-chain actors interact with on-chain assets in future investigations.

Source: Decrypt