Two Thai businessmen have sued Tether in the U.S. District Court for the Southern District of New York, challenging the stablecoin issuer’s authority to freeze approximately 42.4 million $USDT before law enforcement obtained a seizure warrant.
Nutthawat Rukthammachalern and Natthawat Kasamvilas allege that Tether blacklisted 10 Ethereum addresses containing precisely 42,417,785.62 $USDT on Oct. 30, 2025. The allegations have not been adjudicated, and Tether had not filed a public response as of Sept. 2.
UPDATE – It appears that the $42.4M Tether freeze in this suit stems from a North Carolina pig-butchering case.HSI Raleigh opened it from a victim tip: romance/investment fraud, fake trading platform, then layering through wallets so the stolen $USDT would look clean. On… https://t.co/W4bLfkIYRv
— Ariel Givner (@GivnerAriel) September 1, 2026
Tether allegedly froze $USDT before obtaining legal process
The plaintiffs claim Tether acted after receiving an informal request from an agent with Homeland Security Investigations. They allege that no warrant, court order, subpoena or other formal legal process authorized the initial freeze.
According to the complaint, Kasamvilas discovered the restriction while attempting to complete a transaction. After contacting Tether, he was allegedly referred to an HSI agent’s email address without receiving an explanation of the legal basis for blocking the funds.
The filing says Tether used the addBlackList function in its Ethereum smart contract, preventing tokens held at designated addresses from moving. A separate function, destroyBlackFunds, allows Tether to burn blacklisted $USDT.
The plaintiffs say they acquired the tokens through secondary-market business transactions and had no direct customer relationship with Tether. They argue that technical control over the smart contract does not automatically give the company legal authority over tokens held by third parties.
Seizure warrant later targeted tokens linked to alleged fraud
On Feb. 19, 2026, a magistrate judge in the Eastern District of North Carolina issued seizure warrant 5:26-MJ-1267-JG. According to the New York complaint, the warrant described a process in which Tether would burn $USDT at the identified addresses, mint an equivalent amount and transfer the replacement tokens to a government-controlled wallet.
Five days later, federal prosecutors announced the seizure of more than $61 million in $USDT. Investigators alleged that the targeted wallets received proceeds from cryptocurrency investment scams commonly known as pig-butchering schemes.
HSI reportedly opened the investigation after receiving a tip from a victim. Investigators traced the funds through multiple wallets that authorities said were used to obscure the money’s source, ownership and connection to fake trading platforms.
The Justice Department thanked Tether for assisting with the asset transfer. Tether separately confirmed its involvement in the broader $61 million operation.
However, the new complaint says the plaintiffs’ specific 42.4 million $USDT remained frozen when they filed the case. The lawsuit seeks to prevent Tether from burning the tokens. Available records therefore do not establish that the disputed assets had already been transferred to the government wallet.
Lawsuit challenges stablecoin issuers’ freezing powers
The plaintiffs are not only challenging the government’s tracing allegations. Their case centers on whether a private stablecoin issuer can restrict secondary-market tokens after an informal law-enforcement request and before receiving judicial authorization.
They also argue that the February warrant could not retroactively validate Tether’s October action. The complaint further disputes whether a seizure warrant allows the company to burn the named property and replace it with newly minted tokens before a final forfeiture judgment.
The claims include conversion, trespass to chattels, unjust enrichment, and requests for declaratory and injunctive relief. The businessmen want Tether ordered to remove the blacklist, pay damages if the tokens are destroyed, and surrender income allegedly earned from reserves supporting the frozen $USDT.
Tether’s law-enforcement powers operate at considerable scale. As crypto.news previously reported, the company froze $514 million across 370 addresses during one 30-day period in 2026. Its 2025 blacklist covered 4,163 Ethereum and Tron addresses, according to BlockSec data cited in that report.
The next procedural step will be service of the complaint and Tether’s response. The court could also consider an early injunction request if the plaintiffs seek immediate protection against the burning or reissuance of the disputed tokens.
Separately, the plaintiffs told the New York court that they filed an application in North Carolina on July 31 seeking the return of the $USDT. Neither proceeding has produced a judgment on ownership, forfeiture or Tether’s liability.
