Tether Sued Over $42.4M USDT Freeze Before U.S. Warrant Arrived

Two Thai businessmen have filed a lawsuit against Tether in the U.S., over the freezing of 42,417,785 USDT (worth about $42.4 million given USDT’s $1.00 peg). The case was lodged in the U.S. District Court for the Southern District of New York on August 31, 2026, and claims Tether froze their assets before any warrant, court order, or formal legal process arrived. This case was highlighted by Ariel Givner, a corporate & IP counsel in fintech and founder of Givner Law.

Tether has just been sued over a $42.4 million USDT freeze by Two Thai businessmen in the SDNY.

Nutthawat Rukthammachalern and Natthawat Kasamvilas say Tether blacklisted their wallets on October 30, 2025 (42,417,785.62 USDT) after an informal request from an HSI agent.

No… pic.twitter.com/hDDgMZRrIv

— Ariel Givner (@GivnerAriel) September 1, 2026

The dispute traces back to events between October 30, 2025, and February 19, 2026. According to the plaintiffs, Tether first acted after getting an informal request from a U.S. government agent. Over three months later, the U.S. government secured a seizure warrant, instructing Tether to destroy the frozen USDT and reissue the same amount to a government-controlled wallet.

The Freeze Came Before the Warrant

The complaint makes it clear that these businessmen weren’t direct Tether customers and had no contact with the company. They bought their USDT on the secondary market and managed their holdings directly through their private keys.

On October 31, 2025, when the plaintiffs tried moving their USDT, they found their funds frozen. They reached out to Tether the next day and one of them asked for an explanation. Tether replied on November 2, pointing him toward a Homeland Security Investigations special agent for more information.

The filing says Tether used the “addBlackList” command in its USDT smart contract to freeze those addresses. The complaint also notes Tether’s separate “destroyBlackFunds” function, which can wipe out a blacklisted address’s balance completely.

The plaintiffs insist the October 30 freeze happened only from an informal agent’s request, not from any writ, warrant, order, subpoena, levy, restraining order, or legal process instructing Tether to act. The main argument of these businessmen is that getting an informal request from law enforcement does not automatically give a private company the legal power to interfere with someone else’s property.

The February 19 Warrant

Things changed on February 19, 2026. The U.S. Attorney’s Office for the Eastern District of North Carolina obtained a seizure warrant, Case No. 5:26-MJ-1267-JG. According to the complaint, the order asked Tether International to burn the frozen USDT and then issue an equivalent amount to a government-controlled wallet.

An affidavit from an HSI agent showed how authorities planned to work with Tether to take the funds. But the plaintiffs challenged the foundation of the warrant, saying the government failed to show probable cause or prove the USDT was subject to forfeiture.

On July 31, 2026, the plaintiffs filed a motion in North Carolina seeking the immediate return of their USDT. They stress that the New York’s lawsuit is about Tether’s own conduct as a private company and is separate from the government’s case.

The $42.4 Million Dispute

At the core of the complaint are the addresses frozen by Tether held 42,417,785.62 USDT as of October 30, 2025, worth the same in U.S. dollars at USDT’s fixed value. The plaintiffs argue that this freeze cut off their business capital, blocking them from using the USDT for their operations. They’re seeking damages for lost access to the funds, statutory interest, the cost of finding replacement capital, and missed business opportunities.

They also accuse Tether of profiting from the freeze. The complaint states that Tether, after minting USDT, uses the underlying dollars to buy interest-bearing securities, mainly U.S. Treasuries. The plaintiffs allege Tether kept investing the reserves linked to the frozen USDT and kept all the earnings. So, the lawsuit demands restitution and the return of any interest, yield, income, or profits generated from those reserves during the freeze.

A Wider Question Over Tether’s Control

The plaintiffs argue their case goes beyond their own frozen funds. The complaint says Tether has used its freeze powers on thousands of blockchain addresses belonging to people with no contractual ties to the company.

The lawsuit also references New York’s revised Uniform Commercial Code, including Article 12, which took effect June 3, 2026. The plaintiffs claim USDT counts as a “controllable electronic record”. They say they acquired it for value, in good faith, with no knowledge of any competing property claims.

At the centre of their argument is the line between technical ability and legal authority. The plaintiffs admit Tether has the technology to freeze or burn USDT, but they maintain that this power doesn’t, on its own, give Tether the legal right to use it against someone else’s property.