Overview
- Conduit has filed a lawsuit against Tether in a New York federal court, claiming the stablecoin issuer unjustifiably froze $2.76 million in its treasury wallet on September 24, 2025, and has since refused to release the funds.
- The company states that a Brazilian police investigation regarding a third party, Onix, is the context of the situation; however, Conduit asserts that its wallet was created after Onix’s last transaction, never contained Onix funds, and was flagged by Tether's own compliance team, not law enforcement.
Conduit, a company specializing in cross-border payments, has initiated a legal action against Tether, alleging that the prominent stablecoin provider has frozen $2.76 million of its assets without valid reasons and has not released the funds for over a year.
In a legal complaint submitted on Monday to the U.S. District Court for the Southern District of New York, Conduit claims that Tether locked its treasury wallet, which functions as the digital equivalent of a traditional bank account, on September 24, 2025, and has since profited from the reserves that back the frozen funds.
Myriad: Predict Ethereum’s next move! Click here.The lawsuit includes allegations of conversion, unjust enrichment, breach of fiduciary duty, and computer fraud, with a demand for the return of the funds.
The controversy centers around a Brazilian investigation that Conduit claims is unrelated to its operations. The Brazilian Federal Police were reportedly investigating entities associated with a firm named Onix, which had previously utilized Conduit's services.
However, Conduit asserts that its treasury wallet was established in May 2025, nearly a month after Onix's final transaction on its platform, and never housed any funds from Onix. The company has noted that the Federal Police confirmed they did not flag the wallet and are unaware of the criteria Tether used to implement the freeze, attributing the decision to Tether’s own T3 Financial Crime Unit.
Conduit argues that the freezing of its assets has severely impacted its operations. Prior to the freeze, the wallet processed over $1.1 billion in transactions within a four-month period, and the lack of liquidity has led to employee layoffs and office closures.
Meanwhile, Conduit points out that Tether has continued to earn interest on the U.S. Treasury securities that back the frozen tokens, effectively benefiting financially from the situation without any consequences for itself.
This lawsuit adds to the growing scrutiny surrounding Tether's ability to freeze USDT at its discretion. Earlier this year, Tether faced another lawsuit concerning a $42.4 million freeze and has previously frozen hundreds of millions in tokens flagged for illicit activities. Additionally, Tether recently collaborated with Circle to freeze funds linked to the Bitget hack.
Ironically, Tether has also faced criticism for not freezing enough assets, with U.S. Senator Richard Blumenthal labeling USDT a “superhighway” for evading sanctions, particularly in relation to Iran's use of the stablecoin. The company seems to be in a difficult position regardless of its actions.