Cross-border payments company Conduit has sued Tether, alleging that the stablecoin issuer froze $2.76 million of its funds without justification and has refused to release the money for more than a year.
In a complaint filed Monday in the U.S. District Court for the Southern District of New York, Conduit said Tether froze its treasury wallet on Sept. 24, 2025. The company described that wallet as the digital equivalent of its operating bank account. Since then, the funds have remained locked, while Tether has continued to profit from the reserves backing the tokens, according to the filing.
Lawsuit centers on the wallet freeze
Conduit brought claims including conversion, unjust enrichment, breach of fiduciary duty, and computer fraud. It is asking the court to order the return of the frozen funds.
The dispute turns on a Brazilian investigation that Conduit says had nothing to do with its treasury wallet. According to the complaint, Brazil’s Federal Police were investigating entities linked to a company called Onix, which had at one point used Conduit’s platform.
Conduit said the frozen treasury wallet was created in May 2025, nearly a month after Onix completed its last transaction on the platform, and that the wallet never held any Onix funds. The company also said Brazil’s Federal Police confirmed they never flagged the wallet and do not know what criteria Tether used to freeze it. The complaint points to Tether’s own T3 Financial Crime Unit as the body that made the decision independently.
Conduit says the freeze damaged its business
Conduit argued that the freeze gutted its business. Before the wallet was locked, it processed more than $1.1 billion in volume across roughly four months, the company said. It added that the resulting liquidity hit forced layoffs and office closures.
At the same time, Conduit contends that Tether has continued to earn interest on the U.S. Treasury securities backing the frozen tokens, effectively “reaping the financial rewards” of the freeze at no cost to itself.
Case adds to scrutiny over Tether’s freeze powers
The lawsuit adds to broader scrutiny of Tether’s ability to freeze USDT at its own discretion.
Tether was also sued separately this year over an alleged unlawful freeze of $42.4 million in USDT. The company has frozen hundreds of millions of dollars in tokens flagged for illicit activity. More recently, Tether joined Circle in freezing funds tied to the Bitget hack.
At the same time, Tether has also faced political criticism for apparently not freezing enough. Sen. Richard Blumenthal recently described USDT as a “superhighway” for sanctions evasion, pointing to Iran’s use of the stablecoin.