Conduit sues Tether over $2.76 million in frozen USDT

Payment firm Conduit sued Tether in the U.S. District Court for the Southern District of New York, alleging that the stablecoin issuer improperly froze $2.76 million in USDT and has no basis to keep the funds.

According to the complaint, Tether froze the funds on Sept. 24, 2025, and referred Conduit to Brazil’s Federal Police for information about the seizure. Conduit claims Brazilian authorities denied ordering Tether to freeze its wallet, while acknowledging that they were investigating transfers involving Onix that had used Conduit’s platform.

Blockchain analysts identified 23 Tron addresses that were frozen on the same date. Conduit’s wallet, which held about $2.7 million in USDT, remained frozen. The company described it as a treasury wallet created about a month after Onix’s last transaction through its platform.

Conduit asked Tether to return the funds or explain the legal basis for withholding them. The lawsuit alleges that Tether declined to do either. Conduit also claims that Tether continues to earn interest on the reserve assets backing the frozen USDT.

Taylor Monahan, a security and blockchain expert, wrote that Brazilian authorities may have communicated unclearly about the addresses they wanted frozen. She also raised the possibility that Conduit had presented a selective account of the dispute to seek the release of its wallet without directly addressing the Brazilian investigation.

The case is the second lawsuit filed against Tether in less than two months over frozen USDT. In the earlier case, two plaintiffs sought the return of $42.4 million in frozen tokens and interest income they claimed Tether earned on the related reserve assets.

Tether is also facing scrutiny from U.S. lawmakers over the use of USDT in illicit financial activity. A U.S. Senate report released in late September identified the stablecoin as a channel for alleged illicit crypto flows linked to Iran. Tether has said it froze more than $500 million connected to the Iranian regime.

USDT had about $184 billion in circulation, making it the largest stablecoin by market capitalization, according to DeFiLlama.