Conduit Sues Tether Over $2.76M in USDT Frozen for Over a Year

A Frozen Treasury Wallet Heads to Court

Cross-border payments firm Conduit Technology has sued Tether, the issuer of USDT, in New York federal court, seeking the release of $2.76 million in tokens that have sat frozen for more than a year. The complaint, filed on October 5, names four Tether entities as defendants: Tether International, Tether Holdings, Tether Investments and Tether Operations. Conduit, which moves money for clients across more than 100 countries in stablecoins such as USDT and Circle's USDC, says the frozen address served as its operating account, the corporate equivalent of a bank balance, and part of a pre-funded PayFi settlement model that also spans retail efforts like XT Pay's QR checkout networks. The firm created the wallet in May 2025 through custody provider Fireblocks; before Tether blacklisted it on September 24, 2025, it had processed 4,427 transactions with 78 counterparties worth more than $1.1 billion. At the center of the dispute is who asked for the freeze. Brazilian police investigating an unrelated company never designated Conduit's treasury wallet, the filing says; instead, Tether acted “on its own initiative” through its T3 Financial Crime Unit, selecting the address under undisclosed criteria. The USDT price stayed pinned near $1.00 throughout, but for Conduit the tokens were working cash, not a market bet. Law firm Baker Botts represents the plaintiff.

Six Claims and the Reserve Yield Fight

Conduit pursues six causes of action: unjust enrichment, computer fraud, breach of fiduciary duty, conversion, a declaratory judgment in its favor and an accounting of the reserves behind the frozen tokens. The economics are the sharpest part of the argument. Because Tether backs its reserves with interest-bearing instruments, mostly U.S. Treasuries, a frozen wallet costs the issuer nothing while yield keeps accruing, which the filing says gives Tether a financial reason to freeze and hold. As relief, Conduit wants the tokens unfrozen, compensatory damages of at least $2.76 million, punitive damages, and restitution and disgorgement of all interest and profit earned on the funds. It also seeks a matching $2.76 million for the losses caused by the freeze, which the company says forced layoffs and office closures because it could no longer pre-fund client transactions. The Onix timeline anchors the factual case: former client Onix Intermediações stopped using Conduit's platform in April 2025, roughly a month before the treasury wallet existed, and the wallet never held Onix funds, the complaint states. A Brazilian court has already found Conduit was not under investigation in the Onix matter. On-chain data confirms the aftermath: as of October 6, the Tron address in the complaint holds just $33 in TRX alongside about $2.756 million in Tron-based USDT. The freeze hit one wallet, not the token: the USDT order book across the Best Crypto Exchanges stayed untouched and the peg held.

A Second Freeze Suit in Five Weeks

Conduit's case lands five weeks after another freeze dispute reached the same courthouse. On August 31, Thai businessmen Nutthawat Rukthammachalern and Natthawat Kasamvilas sued Tether over roughly $42.4 million in USDT blacklisted across 10 Ethereum addresses on October 30, 2025, following what their complaint calls an informal U.S. law-enforcement request; a magistrate judge signed the seizure warrant only on February 19, nearly four months later. Tether has called that suit a baseless attempt to interfere with its work alongside global law enforcement, including the Department of Justice, and says it works with over 340 agencies in 65 countries, having helped freeze more than $4.4 billion in assets tied to suspected crime. Its joint unit with TRON, the T3 Financial Crime Unit, supported Brazilian police in Operation Lusocoin, an effort that locked up over 3 billion reais in digital assets, among them 4.3 million USDT tied to a criminal network. Washington is pressing the same question from the other side: a Senate subcommittee led by Richard Blumenthal asked the Treasury and the Justice Department on September 28 to review Tether's sanctions and anti-money-laundering compliance after finding that 84% of 846 Iran-linked wallets moved funds almost wholly in USDT, a pattern our earlier Senate report coverage tied to $34.6 million in USDT moving before the Iran wallet freezes.

The Legal Test Ahead for Issuer Freeze Powers

COINOTAG's read: the complaint we reviewed, docketed on October 5 in the Southern District of New York as Conduit Technology Inc. v. Tether Holdings S.A. de C.V., sets up a question no ruling has settled, whether an issuer may seize tokens when no police request exists. Its central sentence, that Tether acted based on its own undisclosed criteria, will anchor the case. The reserve yield sharpens the stakes, a point New York Attorney General Letitia James and Manhattan District Attorney Alvin Bragg made when they told Congress the GENIUS Act lets stablecoin issuers pocket frozen funds and their interest. Tether's regulated footprint already shows strain: Anchorage Digital, backed by Tether, recently cut 17% of staff, roughly 68 jobs.