Tether blacklisted $42.4m of USDT 112 days before the seizure warrant existed
Two Thai businessmen say a Homeland Security agent asked informally, without a warrant, and Tether flagged ten Ethereum addresses holding $42.4m of USDT that the men had bought on the secondary market without ever opening a Tether account.
The Investor · Invest desk
What happened
- Two Thai businessmen, Nutthawat Rukthammachalern and Natthawat Kasamvilas, sued four Tether entities in the Southern District of New York over about $42.4 million of frozen USDT held across ten Ethereum addresses.
- The complaint says Tether blacklisted those addresses on October 30, 2025, after a Homeland Security Investigations agent asked unofficially, with no warrant, no court order and no notice to the holders.
- A federal magistrate judge in North Carolina signed the seizure warrant on February 19, 2026, months after the tokens had already stopped moving.
- Tether calls the suit a baseless attempt to interfere with its work with global law enforcement, the Department of Justice included.
Why it matters
- Who's exposed exposure A USDT balance is immobilisable by whoever persuades the issuer, because the blacklist lives in the contract's administrative functions rather than in any agreement with the holder, which puts it in the counterparty column beside bank freeze risk.
- What it costs cost Until a court says otherwise, the cost of a freeze falls entirely on the holder while the yield on the matching reserves accrues to the issuer, an asymmetry a treasurer prices rather than appeals.
- Who has to decide decision Anyone running operating cash in USDT has to decide now, ahead of any ruling, whether "freely transferable" is a term to rely on or a description with an exception the plaintiffs say is undisclosed.
- What it sets up precedent If the burn, mint and transfer plan runs before a final forfeiture judgment, the route from a private issuer's tokens into a government wallet is documented in a signed order and available to the next agency that asks.
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Begin with the plumbing. Tether holds administrative functions inside the USDT contract that let it flag an address, after which the tokens stay visible on Ethereum and stop being transferable, and it can burn them outright [14]. No custody changes hands, which is the plaintiffs' entire theory: Rukthammachalern and Kasamvilas say they acquired the tokens in secondary-market business transactions and never opened a Tether account, bought from the company, or agreed to its terms [16]. Their counsel, Mark Beckett, states the absence directly, saying Tether "has no contractual relationship with our clients, is not a custodian of our clients' USDT, and has no legal right or basis to blacklist our clients' accounts" [19].
The money question is smaller than $42.4m and more useful. The complaint says Tether takes in dollars when it mints and buys interest-bearing instruments, mostly US Treasuries held in New York [7], and that freezing a holder's tokens costs the company nothing while the matching reserves keep earning, which the plaintiffs characterise as a financial inducement to freeze and then burn [8]. October 30, 2025 to February 19, 2026 is 112 days [20]. On $42.4m, each percentage point of annual yield across those 112 days is roughly $130,000 [22], which is the actual size of the disgorgement fight, and a court that awards it has put a price on a function that presently has none.
Against the practice, the case is small: $42.4m is 0.96% of the more than $4.4bn that Tether said in April its work with over 340 law-enforcement agencies across 65 countries had helped freeze [15][21]. This is probably wrong, but the branch that should bother a corporate treasurer is the one where the plaintiffs lose on their own ground. If an issuer owes nothing to a holder who never opened an account, then the blacklist is a characteristic of the asset rather than a term of a bargain, and an informal request becomes a lawful way to immobilise a working balance with no obvious defendant. Tether's framing points that way, calling the suit a baseless interference with its law-enforcement work [9].
Three plausible tracks. The parties settle and the addresses quietly unfreeze, and no court reaches the duty question. Or the court reaches it and finds no duty, the outcome above. Or it holds that process was owed before the freeze and returns the reserve income, the only result that changes an incentive; the plaintiffs also argue the February warrant neither retroactively authorised the freeze nor licensed destroying the original tokens before a final forfeiture judgment [12]. What would make the counterparty read wrong: neither account before us says what conduct the warrant alleged [23], and if these ten addresses held proceeds a treasurer can cleanly distinguish from its own, this is a forfeiture dispute and nothing more. It would also collapse if Tether produced legal process dated before October 30 that the complaint omits, though Cryptopolitan calls the gap almost four months [17] and Decrypt more than three [18], and neither describes anything sitting inside it.
What to watch
- Whether the burn, remint and transfer sequence written into the February warrant is executed before any final forfeiture judgment.
- Whether Tether files legal process dated before October 30, 2025 that the complaint does not mention.
- Whether the court reaches the duty owed to a holder with no Tether account, or the addresses quietly unfreeze under a settlement.
Information, not investment advice. This story is general information about companies and markets, drawn from cited reporting. It is not a recommendation to buy, sell or hold any security; check the cited sources before acting.
Clarity's read
What the record supports and how the coverage leans. The claims behind it follow.
Reality
- Evidence50
- Adoption
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- Hype gap+25
- Incentives65
- Confidence55
Perspective Coverage
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Claim ledger
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- [1]
Two Thai businessmen, Nutthawat Rukthammachalern and Natthawat Kasamvilas, sued four Tether entities in the U.S. District Court for the Southern District of New York over about $42.4 million of frozen USDT.
- [2]
The lawsuit was filed on August 31 in the Southern District of New York.
- [3]
The complaint says Tether blacklisted the ten addresses on October 30, 2025, after a Homeland Security Investigations agent unofficially asked for the blacklisting, without a warrant, court order, or notice to the account holders.
- [4]
A federal magistrate judge in North Carolina did not sign a seizure warrant until February 19, 2026.
- [5]
The complaint states the warrant laid out a plan for Tether to burn the frozen USDT, mint an equal amount of new tokens, and transmit them to a government-controlled wallet.
- [6]
The plaintiffs seek a ruling that the freeze is unlawful, an order forbidding destruction of the tokens before any final forfeiture ruling, damages, and the income Tether earned while the funds were frozen.
- [7]
The complaint says that when Tether mints USDT it takes in dollars and purchases interest-bearing instruments, mostly US Treasury securities held in New York, which constitute the reserves.
- [8]
The plaintiffs contend that freezing a customer's USDT costs Tether nothing while it continues to accumulate yield on the corresponding reserves, which they say hands the company a financial inducement to freeze tokens and burn them.
- [9]
Tether said the suit is "a baseless attempt to interfere with Tether's important work with global law enforcement, including the Department of Justice."
- [10]
Tether and the plaintiffs' attorneys did not immediately respond to Decrypt's requests for comment.
- [11]
The USDT was held across ten Ethereum addresses, nine belonging to Rukthammachalern and one to Kasamvilas.
- [12]
The plaintiffs argue the warrant neither retroactively authorized the freeze nor permitted Tether to destroy the original tokens before a final forfeiture judgment.
- [13]
The plaintiffs say Tether markets USDT as stable, fully backed and freely transferable but does not mention that it can block or destroy any holder's tokens on any blockchain at will.
- [14]
Tether controls administrative functions in USDT's smart contract that allow it to blacklist addresses on networks including Ethereum; blacklisted tokens remain visible on the blockchain but cannot be transferred, and Tether can also burn USDT held at those addresses.
- [15]
In April, Tether said it works with more than 340 law-enforcement agencies across 65 countries and that the cooperation had helped freeze more than $4.4 billion in assets connected to suspected unlawful activity.
- [16]
Rukthammachalern and Kasamvilas said they acquired the USDT in secondary-market business transactions and never opened Tether accounts, bought tokens directly from the company, or agreed to its terms.
- [17]
Cryptopolitan describes the interval between the freeze and the warrant as almost four months.
- [18]
Decrypt describes the same interval as more than three months.
- [19]
Counsel Mark Beckett said Tether "has no contractual relationship with our clients, is not a custodian of our clients' USDT, and has no legal right or basis to blacklist our clients' accounts."
- [20]
The interval between the October 30, 2025 blacklisting and the February 19, 2026 seizure warrant is 112 days.
- [21]
The $42.4 million in this case equals 0.96% of the more than $4.4 billion Tether says its law-enforcement cooperation has helped freeze.
- [22]
Each percentage point of annual yield on $42.4 million over 112 days is about $130,000.
- [23]
Neither published account states what alleged conduct the February 19, 2026 seizure warrant was based on.
Sources
4 independent publishers whose own reporting we read for this story.
- cointelegraph.comThai businessmen sue Tether for freezing $42M in $61M pig butchering case
1 article · September 2, 2026
- cryptopolitan.comLawsuit says Tether locked $42.4 million in USDT months before any warrant existed
1 article · September 2, 2026
- decrypt.coTether Sued Over Alleged Unlawful Freeze of $42.4 Million in USDT
1 article · September 2, 2026
- pymnts.comTether Accused in Lawsuit of Improperly Freezing 42.4 Million Stablecoins
1 article · September 2, 2026
Topics and entities
Topics
- Crypto asset seizure and forfeiture
- Stablecoins
- Pig Butchering Scams
Entities
- US District Court for the Southern District of New York
- Ethereum
- Tether
- USDT
- Homeland Security Investigations
- Paolo Ardoino