- A payments firm says Tether froze $2.76m (roughly £2.1m) of its stablecoins and has refused to release them for more than a year. It is now suing.
- The firm alleges the freeze was Tether’s own decision, prompted by a Brazilian investigation it says it has no connection to. Tether has not commented publicly.
- No court order is required for a freeze like this. The ability to make an address unspendable is written into the USDT contract itself.
Stablecoins are sold as dollars that move at the speed of crypto. A payments company called Conduit says it has $2.76m of them sitting in a wallet it controls, visible to anyone looking at the , and that it has not been able to move a cent of it for more than a year. It has taken Tether to court.
If you hold USDT, your balance depends on a company’s decision as much as on your own security. The issuer can switch off any address at will, and there is no complaints line, no ombudsman and no deposit protection scheme standing behind it. That is true whether the sit on an exchange or in a wallet whose keys only you hold.
How a stablecoin freeze actually works
USDT is not its own blockchain. It is a token that runs on other networks, mainly Ethereum and Tron, and the rules governing it are set out in a piece of code called a contract. That contract includes a blacklist.
When Tether adds an address to it, the tokens stay visible in the wallet and the balance does not change. They simply stop being spendable: any attempt to move them fails. A second function lets the issuer destroy blacklisted tokens and reissue the same amount to a different address, which is how recovered funds are typically handed over to police or prosecutors.
This is where the usual advice about holding your own coins runs out of road. With bitcoin, the is the whole system: whoever holds it controls the coins and nobody can override that. With a centrally issued stablecoin, the key controls a token whose issuer has kept an override for itself. The two are often described in the same breath and they are not the same arrangement.
What is established, and what is claimed
Confirmed: the funds are frozen and a lawsuit has been filed. Everything else in this story is Conduit’s account of events, set out in a complaint we have not seen. We are working from Decrypt’s report rather than the filing itself, and Tether had not responded publicly at the time of writing.
Conduit’s central allegations are that Tether acted on its own initiative rather than at the request of an authority, that the Brazilian investigation cited has nothing to do with the firm, and that Tether has continued to earn a return on the reserves backing the frozen tokens while declining to release them.
That last claim is less exotic than it sounds. Each USDT in circulation is meant to be backed by reserves, mostly short-dated US government debt, and those reserves earn interest that belongs to Tether. Freezing tokens does not retire them. The backing stays on Tether’s books and keeps paying. Whether that amounts to anything improper is exactly what a court would have to decide, and no court has decided anything yet.
Where frozen money usually ends up
Freezing is not rare. By Tether’s own account the company has blocked well over $2bn of USDT across thousands of addresses, working with law enforcement agencies in dozens of countries, and it publicises those cooperations as evidence that a transparent ledger is better for investigators than cash.
The part that gets less attention is what happens afterwards. In the cases Tether has publicised, the money has generally been routed to the authorities that asked for it, or to victims identified by them. There is no established route by which a frozen holder who turns out to be uninvolved simply gets their balance switched back on. That is the gap Conduit is trying to force a court to fill, and a ruling either way would be the first real test of how much discretion the issuer actually has.
The same power, three stories
We have now covered this mechanism three times from different directions: a US Senate referral concerning Iran-linked addresses, questions about reserve exposure through EQIBank, and now a civil claim from a company that says it was caught by mistake. The underlying fact is identical in all three. A private firm can render dollar-denominated balances unusable, immediately and globally, and the only check on that is reputational until somebody sues. You can follow the thread in our news archive.
What to watch
Whether Tether files a response that names the authority behind the freeze. If it can point to a request from Brazilian investigators, the story becomes a dispute about mistaken identity. If it cannot, Conduit’s version of how this started looks a great deal stronger.
And whether any court orders a release. A judge instructing an issuer to unblacklist an address would be a genuine precedent, and it would matter to every business that treats stablecoins as working capital rather than a trade.