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Tether allegedly acted before obtaining legal process
Nutthawat Rukthammachalalern and Natthawat Kasamvilas allege in their complaint that Tether blacklisted ten Ethereum addresses containing precisely 42,417,785.62 USDT on October 30, 2025. The plaintiffs claim Tether acted after receiving an informal request from a Homeland Security Investigations agent. They contend no warrant, court order, subpoena, or other formal legal process authorized the initial freeze.
Kasamvilas discovered the restriction after attempting a transaction. When he contacted Tether, the company allegedly referred him to an HSI agent's email address without explaining its legal basis for blocking the funds. The complaint says Tether used the addBlackList function within its Ethereum smart contract, which prevents tokens at designated addresses from moving. Another 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 possessing technical control over the smart contract does not automatically give Tether legal authority over tokens held by third parties.
Later warrant targeted tokens linked to alleged fraud
On February 19, 2026, a magistrate judge in the Eastern District of North Carolina issued seizure warrant 5:26-MJ-1267-JG. According to the complaint, the warrant described a process under 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 called pig-butchering schemes. HSI reportedly opened the investigation after receiving a victim's tip, tracing funds through multiple wallets used to obscure the money's source and connection to fake trading platforms. The Justice Department thanked Tether for assisting with the asset transfer. However, the complaint says the plaintiffs' specific 42.4 million USDT remained frozen when the case was filed.
Lawsuit tests stablecoin issuers' freezing powers
The plaintiffs do not merely challenge the government's tracing allegations. Their case focuses on whether a private stablecoin issuer may restrict secondary-market tokens after an informal law-enforcement request and before receiving judicial authorization. They also argue the February warrant could not retroactively validate Tether's October action. The complaint further disputes whether a seizure warrant permits burning the named property and replacing 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 scale
Tether's law-enforcement powers operate at a considerable scale. 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. 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 burning or reissuing 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. The case could set important precedents for how stablecoin issuers interact with law enforcement and whether their technical ability to freeze tokens translates into legal authority over secondary-market holdings.