The complaint says the blacklist followed an informal request from a Homeland Security Investigations agent in October. The seizure warrant arrived in February, and told Tether to burn the tokens and mint replacements.
Two Thai businessmen sued Tether in Manhattan federal court on Monday, alleging the issuer froze roughly $42.4 million of USDT they held across ten Ethereum addresses at the informal request of a US federal agent, with no warrant, no court order and no notice. The warrant came nearly four months later.
Nutthawat Rukthammachalern and Natthawat Kasamvilas filed the complaint in the Southern District of New York against four Tether entities. According to the filing, Tether blacklisted the addresses on 30 October 2025 after a Homeland Security Investigations agent asked it to. On 19 February a federal magistrate judge in North Carolina issued a seizure warrant, and that warrant set out a plan: Tether would burn the frozen tokens, mint an equivalent quantity of new USDT, and transfer it to a wallet controlled by the government.
That sequence is the case. The plaintiffs argue a warrant issued in February cannot retroactively authorise a freeze carried out in October, and that even a valid seizure warrant does not permit the named property to be destroyed and replaced before a court has entered a final forfeiture judgment. They also say they have no relationship with Tether at all: they bought the USDT in secondary-market business transactions, never opened Tether accounts, never purchased tokens from the company and never agreed to its terms. They want access restored, damages, and a share of the income Tether earned on the reserves backing the frozen tokens while they were locked.
"Tether froze our clients' funds following an informal government request with no warrant, no court order, no legal process directed to Tether and no notice," Mark Beckett, counsel for the plaintiffs, told Decrypt. Tether's response was blunt. The suit, it said, is "a baseless attempt to interfere with Tether's important work with global law enforcement, including the Department of Justice, to prevent the unlawful use of USDT."
Reports link the funds to a wider Justice Department investigation into more than $61 million of USDT that prosecutors say was stolen through pig-butchering schemes, the long-con romance frauds in which victims are groomed into fake investments. The plaintiffs' lawyers reject any suggestion their clients were involved in illicit activity and say the two men are contesting the government's position in the Eastern District of North Carolina, where the forfeiture case sits.
The mechanism that makes this possible is written into USDT's contract. Tether retains an administrative function that lets it add any address to a blacklist on Ethereum and the other chains it issues on. Blacklisted tokens stay visible on-chain but cannot move, and Tether can burn them outright. The company describes this as a feature. In April it said it works with more than 340 law-enforcement agencies in 65 countries and has helped freeze over $4.4 billion of assets connected to suspected unlawful activity. "USDT is not a safe haven for illicit activity," chief executive Paolo Ardoino said at the time. "When credible links to sanctioned entities or criminal networks are identified, we act immediately and decisively."
Nobody disputes that Tether can do this. The question the court is being asked is whether it may do it on the strength of an agent's email, and what happens to the holder in the months before a judge is involved. The answer matters well beyond two Thai claimants. Exchanges have handed over customer records on informal requests before; Binance gave Russian authorities a KYC file that put a Ukraine donor in prison. A freeze is more consequential than a disclosure, because the money stops moving on the day of the request, not on the day of the warrant.
It also lands at an awkward moment for the argument that regulated issuers are safer. Twenty-one banks have just committed to a dollar stablecoin of their own, pitching compliance and law-enforcement cooperation as the product. That pitch assumes cooperation and legal process are the same thing. This lawsuit is a test of whether they are.
The case is before the Southern District of New York. Tether has not yet filed a response.
