Two Thai nationals have filed a lawsuit against Tether in the U.S. District Court for the Southern District of New York, accusing the stablecoin issuer of freezing roughly $42.4 million in USDT without a court order and later treating a North Carolina seizure warrant as authority to burn and reissue the tokens to a government-controlled wallet.
The complaint was filed on August 31, 2026, under case number 1:26-cv-07400. The plaintiffs, Nutthawat Rukthammachalern and Natthawat Kasamvilas, named Tether Holdings S.A. de C.V., Tether International S.A. de C.V., Tether Operations S.A. de C.V., and Tether Investments S.A. de C.V. as defendants.
Details of the Alleged Freeze
According to the complaint, Tether used its smart-contract blacklist function on October 30, 2025, to freeze 42,417,785.62 USDT held in the plaintiffs’ Ethereum addresses. The filing states that the freeze came after an informal request from a Homeland Security Investigations (HSI) agent and was not backed at that point by a warrant, court order, or any other legal process aimed at Tether.
The plaintiffs say they were never given prior notice of the freeze. When one of them emailed Tether in early November 2025 to ask why the funds were locked, the company reportedly directed him to an HSI special agent instead of providing an explanation.
More than three months after the initial freeze, on February 19, 2026, the U.S. Attorney’s Office for the Eastern District of North Carolina secured a seizure warrant in magistrate case 5:26-MJ-1267-JG. The complaint alleges that this warrant instructed Tether International to burn the frozen USDT and mint an equivalent amount into a wallet controlled by the government.
The plaintiffs argue that Tether has no custodial relationship with holders who acquire USDT on the secondary market, and that they are not parties to Tether’s terms of service. They further contend that the February 2026 warrant did not retroactively authorize the October 2025 freeze or any subsequent burn and reissue of the tokens.
The lawsuit also raises an unjust enrichment claim, alleging that Tether continued to earn yield on Treasuries and other reserve assets backing the frozen tokens throughout the period they remained immobilized.
Relief sought in the complaint includes a declaration that the freeze and any burn or reissue are unauthorized, along with claims for conversion, trespass to chattels, and unjust enrichment. The plaintiffs are also seeking an injunction requiring Tether to un-blacklist their wallets and halt any burn, in addition to compensatory damages, disgorgement of interest, and punitive damages.
The $61 Million North Carolina Seizure
Five days after the February 19 warrant was issued, the U.S. Attorney’s Office for the Eastern District of North Carolina publicly announced on February 24, 2026, that federal agents had seized more than $61 million in USDT. Prosecutors said investigators traced the funds to wallet addresses allegedly used to launder proceeds from cryptocurrency investment scams commonly known as pig butchering schemes.
HSI Raleigh said the case originated from a victim tip. Agents followed the funds through a series of wallets and identified addresses that still held significant balances. The Department of Justice (DOJ) publicly credited Tether for its assistance in transferring the assets. Tether issued its own statement on February 25, 2026, saying it had been recognized by the DOJ for helping recover close to $61 million in USDT.
The new SDNY complaint treats the North Carolina investigation as background rather than a settled finding against the two Thai plaintiffs. The filing states that the plaintiffs have separately sought the return of their tokens in the Eastern District of North Carolina and that the New York action is independent of that proceeding.
Implications for Stablecoin Holders
Tether has the ability to freeze or destroy USDT at any address it blacklists through contract-level controls, a function that is well known among compliance teams and law enforcement agencies. The company has repeatedly stated that it cooperates with agencies around the world and has frozen billions of dollars worth of tokens linked to alleged illicit activity.
The plaintiffs’ argument, however, is narrower. They claim Tether exercised that power against secondary-market holders who had no direct contractual relationship with the issuer, acting only on an informal agency request, while continuing to collect yield on the reserves backing those tokens.
The core legal question raised by the case is whether such a sequence of actions can be lawful before a court of competent jurisdiction issues an order authorising them.
This is not the first challenge of its kind to reach the courts. A separate U.S. in rem action was filed earlier this year seeking the forfeiture of USDT alleged to be pig butchering proceeds, targeting token balances rather than named individuals.
Tether has not yet filed a response in the new SDNY docket. No judge has ruled on the freeze, the warrant, or the requested injunction.
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