Two Thai businessmen have launched legal action against Tether, claiming the stablecoin issuer unlawfully froze about $42.4m in USDT before authorities obtained a seizure warrant.
Nutthawat Rukthammachalern and Natthawat Kasamvilas filed their complaint on 31 August in the U.S. District Court for the Southern District of New York. They allege that Tether blacklisted 10 Ethereum addresses containing exactly 42,417,785.62 USDT on 30 October 2025.
The allegations have not been tested in court. Tether had not filed a public response by 2 September.
The plaintiffs say Tether acted after receiving an informal request from an agent at Homeland Security Investigations (HSI). According to the complaint, the freeze was imposed without a warrant, court order, subpoena or any other formal legal process.
Kasamvilas is said to have discovered the restriction when he tried to make a transaction. The filing claims that, after he contacted Tether, the company directed him to an HSI agent’s email address but did not explain the legal basis for blocking the funds.
Tether used the `addBlackList` function in its Ethereum smart contract, the complaint alleges. That function prevents USDT held at selected addresses from being transferred. A separate function, `destroyBlackFunds`, allows Tether to burn blacklisted tokens.
The businessmen say they obtained the USDT through secondary-market business transactions and did not have a direct customer relationship with Tether. They argue that the company’s technical control over its smart contract does not, by itself, give it the legal right to control tokens held by third parties.
The dispute later became linked to a federal investigation into cryptocurrency investment scams.
On 19 February 2026, a magistrate judge in the Eastern District of North Carolina issued seizure warrant 5:26-MJ-1267-JG. The New York complaint says the warrant set out a process allowing Tether to burn USDT at the specified addresses, create an equivalent amount of replacement tokens and send them to a wallet controlled by the government.
Five days later, federal prosecutors announced the seizure of more than $61m in USDT. Investigators alleged that the wallets involved had received money from cryptocurrency investment scams commonly known as pig-butchering schemes.
HSI reportedly began the investigation after receiving information from a victim. Investigators traced the funds through several wallets that authorities said had been used to conceal the money’s source, ownership and links to fraudulent trading platforms.
The Justice Department thanked Tether for helping transfer the assets. Tether separately confirmed its involvement in the wider $61m operation.
However, the new complaint states that the 42.4 million USDT belonging to the plaintiffs remained frozen when the case was filed. They are seeking an order preventing Tether from burning the tokens. Available records do not establish that the disputed USDT had already been transferred to the government-controlled wallet.
The case is not limited to the government’s claims about where the money came from. At its centre is the question of whether a private stablecoin issuer can restrict tokens acquired on the secondary market after receiving an informal law-enforcement request but before judicial authorisation has been obtained.
The plaintiffs also contend that the February warrant could not retrospectively make Tether’s October action lawful. They dispute whether a seizure warrant permits the company to destroy the specified tokens and replace them with newly minted USDT before a final forfeiture judgment.
Their claims include conversion, trespass to chattels and unjust enrichment, alongside requests for declaratory and injunctive relief. They want Tether ordered to remove the blacklist, pay damages if the USDT are destroyed and surrender income they allege was generated from reserves backing the frozen tokens.
Tether’s ability to freeze assets operates on a large scale. According to figures previously reported by crypto.news, the company froze $514m across 370 addresses during one 30-day period in 2026. Data from BlockSec, cited in that report, showed that Tether’s 2025 blacklist included 4,163 Ethereum and Tron addresses.
The next procedural stage will be service of the complaint and Tether’s response. The court may also consider an application for an early injunction if the plaintiffs seek immediate protection against the disputed USDT being burned or reissued.
Separately, the businessmen told the New York court that they had applied in North Carolina on 31 July for the return of the tokens. Neither case has resulted in a judgment over ownership, forfeiture or Tether’s liability.
