Conduit Sues Tether Over $2.76M in USDT Frozen Since September 2025

A Payments Firm Takes the Largest Stablecoin Issuer to Court

Cross-border payments company Conduit filed suit against Tether on Monday, saying the stablecoin issuer froze $2.76 million of its USDT and has refused for more than a year to release it or explain why. The complaint landed in the US District Court for the Southern District of New York.

The case matters beyond the sum involved. USDT is the largest stablecoin in circulation, used daily by traders, remittance firms and payment processors who treat it as cash. Conduit’s filing asks a blunt question: if an issuer can switch off a balance without a court order, how cash-like is a stablecoin really?

Tether did not immediately respond to requests for comment, according to Cointelegraph.

What Conduit Says Happened to Its Treasury Wallet

Conduit began holding USDT in a digital treasury wallet in May 2025. In its complaint, the company describes that wallet as the “equivalent of [Conduit’s] operating bank account”, the pot it drew on to pre-fund customer payments.

On 24 September 2025, Conduit says the entire $2.76 million balance stopped moving. Tether had blacklisted the address. The company says it repeatedly asked for the funds to be released but never got a resolution.

“The funds are unequivocally Conduit’s, but Tether has taken them and is denying Conduit access to them,” the filing states. Conduit also says the freeze materially affected its operations, because a payments business that cannot pre-fund transfers cannot settle them for clients.

The Brazilian Investigation at the Center of the Dispute

The freeze traces back to a Brazilian federal police investigation opened in 2024 into two financial intermediaries, Bull Intermediação and Onix Intermediações. Onix was a former Conduit customer that stopped using the platform in April 2025, five months before the freeze.

Conduit argues the link stops there. It says Brazilian police never flagged its treasury wallet, that a Brazilian court confirmed Conduit itself was not under investigation, and that the wallet never held Onix’s money. The complaint says Tether identified the address on its own and acted on criteria it has not disclosed.

Reporting by The Block notes Conduit’s position that it “owes no money to Tether and has no obligation to Tether”.

How a Stablecoin Freeze Actually Works

This mechanism matters for anyone who holds stablecoins, and it surprises most newcomers.

A stablecoin like USDT is a token a company issues on a public blockchain. The issuer sets the token’s rules, including a blacklist function. When an address is added to that list, the tokens still sit in the wallet and remain visible on-chain, but they can no longer be sent anywhere. The holder keeps the private keys and loses the ability to use the balance.

That is different from a bank freeze. A bank acts under a legal instruction and the customer has a regulator to complain to. With a stablecoin, the freeze is a contract-level action by a private issuer, and reversing it may mean going to court. Tether has used the function for years to lock stolen or sanctioned funds, including a reported $550 million tied to Iran.

The practical lesson for everyday users is about concentration rather than panic. Keeping an operating balance spread across assets and a self-custodied crypto wallet reduces how much any single issuer’s decision can affect you.

Conduit Wants Its Money Back, Plus Damages

The suit asks the court to order the release of the $2.76 million. It also seeks an additional $2.76 million to cover damages and what Conduit says Tether earned by holding the matching reserves while the tokens sat frozen. Together, the demands total $5.52 million.

That second half is the novel part. Tether backs USDT with reserves that largely sit in short-term US Treasury bills, which pay interest. Conduit argues that a frozen token leaves the issuer holding income-generating reserves against a balance the customer can’t access.

Not the First Freeze Case Tether Has Faced

The complaint arrives about a month after two Thai nationals sued Tether over $42.4 million in frozen USDT, in a case where the freeze was allegedly imposed months before a US warrant existed. US authorities separately moved in September to seize $61 million in Tether tied to Iranian oil sales, a reminder that the same blacklist tool sits at the heart of both enforcement wins and private disputes.

Taken together, the filings form a pattern. Plaintiffs are not arguing that issuers should never freeze tokens. They are arguing about process: who decides, on what evidence, and how a holder who believes the call was wrong gets heard.

Why the Coming Months Could Test Stablecoin Accountability

If the New York court lets the case proceed, Tether may have to describe in filings how its financial crime unit selects addresses. That disclosure could matter more to the industry than the damages. Payment firms, exchanges and corporate treasuries weighing how much working capital to hold in a single stablecoin would gain a clearer picture of the risk.

A ruling could also sharpen expectations under newer stablecoin rules in the US and Europe, where regulators have focused mainly on reserves and redemption rather than freeze procedures. Anyone tracking how the outcome feeds into crypto news today should treat the litigation as early-stage, since no claim has been tested and timelines in commercial cases often run long.

A Legal Test of Who Controls a Stablecoin Balance

Stablecoins grew into the settlement layer of crypto by behaving like money that moves on open rails. Conduit’s case probes the part of that promise that rarely gets examined until it fails: the issuer’s ability to unilaterally decide that a balance stops working.

How a court answers that will shape how seriously institutions treat issuer risk when they park operating cash in tokens, and whether freeze decisions start coming with the paperwork that bank freezes already require.