Tether Hit With Lawsuit Over $2.76 Million Stablecoin Freeze - Decrypt

In brief

• Conduit sued Tether in New York federal court, alleging the stablecoin issuer froze $2.76 million in its treasury wallet on Sept. 24, 2025, without justification and has refused to release it.
• The firm says a Brazilian police probe into a third party, Onix, was the backdrop, but its wallet was created after - Onix's last transaction, never held Onix funds, and was flagged by Tether's own unit—not police. Conduit says the freeze forced layoffs and office closures while Tether earned interest on the backing reserves.

Cross-border payments company Conduit is taking Tether to court, alleging the stablecoin giant froze $2.76 million of its money without justification and has refused for more than a year to release it.

In a complaint filed Monday in the U.S. District Court for the Southern District of New York, Conduit says Tether froze its treasury wallet, essentially the digital equivalent of its operating bank account, on Sept. 24, 2025, and has since kept the funds locked while profiting from the reserves backing them.

The suit brings claims including conversion, unjust enrichment, breach of fiduciary duty and computer fraud, and demands the funds be returned.

At the heart of the dispute is a Brazilian investigation that Conduit says has nothing to do with it. According to the filing, Brazil's Federal Police were probing entities tied to a firm called Onix, which had once used Conduit's platform.

But Conduit says its frozen treasury wallet was created in May 2025, nearly a month after Onix's last transaction on its platform, and never held any Onix funds. The company says the Federal Police confirmed they never flagged the wallet and don't know what criteria Tether used to freeze it, pointing to Tether's own T3 Financial Crime Unit as having made the call independently.

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Conduit argues the freeze has gutted its business. The wallet processed more than $1.1 billion in volume across roughly four months before being locked, and the company says the liquidity hit has forced it to lay off employees and close offices.

Meanwhile, the company contends, Tether continues to earn interest on the U.S. Treasury securities backing the frozen tokens, "reaping the financial rewards" of the freeze at no cost to itself.

The case adds to mounting scrutiny of Tether's power to freeze USDT at will.

Tether was separately sued this year over a $42.4 million freeze, and the company has frozen hundreds of millions in tokens flagged for illicit activity. Tether also recently joined Circle in freezing funds tied to the Bitget hack.

Meanwhile, and somewhat ironically, the company has faced political heat for apparently not freezing enough. Sen. Richard Blumenthal recently called USDT a "superhighway" for sanctions evasion, pointing to Iran’s use of the stablecoin. Damned if you do, damned if you don’t.

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