Conduit Technology has sued Tether, the issuer of the USDT stablecoin, in federal court in New York over approximately $2.76 million in USDT that the payments company says has remained frozen for more than a year.
In a complaint filed October 5 in the U.S. District Court for the Southern District of New York, Conduit alleges that Tether froze its treasury wallet on Sept. 24, 2025, without providing a reason and has since refused to restore access. The company is seeking the return of the funds, at least $2.76 million in damages, and other relief.
The complaint names 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. The Crypto Times team reached out to Tether for comments on the lawsuit but hasn’t received any response at the time of publication.
Conduit challenges Tether’s freeze
Conduit says it created the disputed treasury wallet on May 20, 2025, to hold working capital in USDT. The company says the wallet was separate from customer transaction wallets and was controlled only by its own treasury personnel.
According to the complaint, the wallet held about $2.76 million in USDT as of Sept. 30, 2026. Conduit says the wallet processed 4,427 transactions involving 78 counterparties and more than $1.1 billion in volume during the roughly four months before the freeze.
The company alleges that Tether froze the wallet on Sept. 24, 2025, preventing it from sending or receiving USDT. Conduit claims Tether has not provided a substantive explanation for the freeze despite repeated requests, including a formal demand from its lawyers in August 2026.
Brazilian investigation forms basis of dispute
The lawsuit centers on a Brazilian criminal investigation involving other companies, including Onix Intermediações Ltda. and Bull Intermediação de Negócios Ltda. Conduit says it had no connection to those entities and that its wallet was never used by Onix. It also says the wallet was created nearly a month after Onix’s last transaction through Conduit’s platform.
According to the complaint, Brazilian Federal Police identified certain wallets linked to the investigation and provided those addresses to Tether’s T3 Financial Crime Unit. Conduit alleges its wallet was not among those addresses. The company further claims that Brazilian authorities later confirmed they did not identify its wallet for freezing and did not know what criteria Tether used to select it.
Conduit also says a Brazilian criminal court determined that it was not among the companies under investigation or those whose assets were ordered frozen.
USDT faces wider scrutiny over Iran, banking exposure
The Conduit case comes as USDT faces scrutiny over its use in sanctions-related activity and Tether’s banking relationships. A U.S. Senate Permanent Subcommittee on Investigations report, cited by The Wall Street Journal, reviewed 846 transaction accounts linked to Iran-related activity and found that 84% had transacted exclusively in USDT.
The report said USDT has become an important payment tool for Iran because it can move through public blockchains outside traditional banking channels. The investigation also examined Iranian crypto exchanges including Nobitex, Wallex, Bitpin and Ramzinex.
Separately, Tether confirmed that some of its funds are held at EQIBank, a Dominica-licensed digital bank facing potential liquidation after U.S. authorities seized funds linked to payment processor Capstone Ltd. Tether said the exposure represents less than 0.034% of its group assets and that it was unaware of the conduct alleged by federal prosecutors.
A July 2026 DOJ civil forfeiture complaint and subsequent court order listed about $84.2 million in assets, including funds held in Wells Fargo and JPMorgan accounts and USDT at two crypto addresses. EQIBank has separately estimated its losses at about $89 million. The figures come from separate filings and have not been reconciled by a court.
Company says freeze disrupted working capital
Conduit alleges that the frozen USDT represented a substantial portion of its working capital and that the loss of access has affected its ability to pre-fund and settle customer transactions.
The company says the resulting liquidity constraints reduced the volume of transactions it could facilitate and contributed to layoffs and office closures. Conduit is seeking compensatory damages of at least $2.76 million, along with consequential damages for alleged lost business opportunities, liquidity harm, and damage to business relationships.
Lawsuit challenges Tether’s control over USDT
The complaint argues that Tether’s ability to freeze USDT gives the issuer centralized control over tokens held in external wallets. Conduit alleges that Tether exercised that control without authorization and improperly interfered with its property. It has brought claims including conversion, unjust enrichment, breach of fiduciary duty, and computer fraud under federal law.
The company also seeks a court declaration that Tether has no legal authority to freeze or otherwise interfere with its USDT and an order requiring the wallet to be unfrozen.
Conduit is additionally seeking an accounting of the reserves attributable to the frozen tokens and any interest or other income allegedly earned on those assets.
Conduit seeks at least $2.76 million
The complaint asks the court to order Tether to restore access to the approximately $2.76 million in USDT, or alternatively return possession of the funds. It also seeks disgorgement of alleged interest and profits tied to the reserves, punitive damages, legal costs, and other relief.
The allegations have not been adjudicated, and the filing does not establish that Tether acted unlawfully. Tether’s response to the complaint was not included in the filing reviewed for this report.
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