Crypto payments infrastructure firm Conduit has filed a federal lawsuit against Tether, alleging the stablecoin issuer froze $2.76 million in USDt without explanation and has refused to release the funds for more than a year The Block.
According to court filings, Tether allegedly froze Conduit's treasury wallet on its own initiative, without a court order or any direct legal obligation to do so Decrypt. The freeze stems from a Brazilian law enforcement investigation launched in 2024, but Conduit maintains it has no connection to that probe and was not itself a target of the inquiry.
The payments firm argues that Tether lacks any "legal entitlement" to continue holding its funds and has generated profits from the frozen reserves while denying Conduit access to its capital The Block. The case highlights ongoing concerns about centralized stablecoin issuers' ability to unilaterally freeze assets without judicial oversight or transparency.
Tether has previously acknowledged cooperating with law enforcement requests to freeze wallets linked to criminal activity, but Conduit's lawsuit suggests this case extends beyond standard compliance procedures. The company claims the freeze was initiated voluntarily rather than through formal legal channels, and that Tether has failed to provide adequate justification despite repeated requests over the 12-month period Decrypt.
The lawsuit was filed in New York federal court, placing the dispute within the jurisdiction of one of the United States' primary financial regulatory centers. The amount at stake, $2.76 million, represents a significant sum for a payments infrastructure provider, particularly given the extended duration of the freeze and Conduit's assertion that it has been unable to conduct normal treasury operations.
Stablecoin freezes have become an increasingly contentious issue in cryptocurrency regulation, as issuers like Tether and Circle maintain the technical capability to blacklist addresses and immobilize funds with a single on-chain transaction. While this functionality is often defended as necessary for compliance with sanctions and anti-money laundering laws, critics argue it creates systemic risks and undermines the censorship-resistance properties that distinguish cryptocurrencies from traditional banking systems.
Tether's USDT remains the largest stablecoin by market capitalization, with its centralized control model subject to ongoing scrutiny from regulators and market participants alike. The Conduit lawsuit adds to a growing body of legal challenges questioning the extent of issuer discretion in freezing assets and the due process afforded to affected parties.
The case also raises questions about jurisdictional boundaries in cross-border cryptocurrency enforcement. With the Brazilian investigation serving as the alleged predicate for the freeze, yet the lawsuit filed in U.S. federal court, the dispute illustrates the complex legal terrain that emerges when stablecoins—designed for borderless transfer—encounter national regulatory frameworks with conflicting standards and procedures Cointelegraph.
Conduit's legal team has not indicated what specific remedies the firm is seeking beyond the return of its funds, though the complaint's emphasis on Tether's profit from frozen reserves suggests potential claims for damages or unjust enrichment may be part of the broader litigation strategy.