Two Thai businessmen have filed a lawsuit against Tether, alleging the stablecoin issuer unlawfully froze $42.4 million in USDT months before federal authorities obtained a formal seizure warrant. The legal action challenges the timing and legal basis of the enforcement measure, raising questions about the authority of digital asset companies to restrict funds based on informal government requests.
According to Decrypt, the plaintiffs claim Tether blocked access to their stablecoins well in advance of any judicial authorization. The case stems from a broader $61 million "pig butchering" scam investigation, as reported by CoinTelegraph. While the plaintiffs do not dispute their involvement in the alleged fraud scheme, they contend that Tether lacked the legal authority to freeze the assets when it did, arguing that the company overstepped its bounds by acting prior to formal legal process.
The core of the dispute centers on the timing and nature of Tether's cooperation with U.S. law enforcement. CoinDesk reports that the businessmen allege Tether acted on an informal request from U.S. authorities rather than a formal court order. According to the lawsuit, this informal request came more than three months before federal agents secured an official seizure warrant for the funds, representing a significant gap between the initial freeze and judicial approval.
The $42.4 million in frozen USDT represents a substantial portion of the total $61 million allegedly involved in the pig butchering operation, a type of social engineering fraud where victims are gradually convinced to invest increasing sums into fraudulent schemes. The plaintiffs' admission of involvement in the scam, as noted by CoinTelegraph, creates an unusual legal posture where the dispute focuses not on guilt or innocence regarding the underlying fraud, but rather on procedural rights and the proper sequence of asset restraint.
The distinction between responding to informal law enforcement inquiries and awaiting formal judicial authorization forms the basis of the legal challenge. The plaintiffs argue that Tether's decision to freeze the assets prematurely violated their rights by depriving them of access to funds without proper legal authority. This positions the case as a test of how stablecoin issuers navigate the space between cooperation with investigations and adherence to formal legal processes.
If the court finds merit in the plaintiffs' claims, the ruling could establish important precedents regarding the obligations of cryptocurrency issuers to await formal legal process before implementing account restrictions. Such a determination would affect how stablecoin operators handle law enforcement requests across jurisdictions, potentially requiring issuers to insist on judicial warrants before freezing assets even in cases involving suspected criminal activity.