Investor sues Tether over alleged $42.4M USDT freeze

A plaintiff filed a complaint in court alleging that cryptocurrency issuer Tether blocked access to $42.4 million in USDT after the plaintiff transferred the stablecoin to addresses Tether later blacklisted. The suit says the freeze made the tokens inaccessible on public ledgers and prevented the plaintiff from moving or spending the funds.

The complaint states Tether issued the stablecoin on multiple blockchains and retains a technical mechanism to flag or block specific wallet addresses. The filing alleges Tether exercised that control over the plaintiff’s addresses without lawful authority or a valid contractual right.

The lawsuit requests that a court restore access to the frozen USDT and award damages tied to the value of the tokens and any consequential losses. The complaint includes transaction records and blockchain snapshots the plaintiff says show transfers and the subsequent denial of access. It lists claims including conversion and unjust enrichment and asks the court to declare the freeze unlawful.

Tether has previously used protocol-level controls to block access to tokens in response to subpoenas, sanctions, law enforcement requests and reports of theft. In 2021, Tether and an affiliated exchange settled with New York authorities over disclosures related to reserves; that settlement required reporting and a financial penalty but did not remove Tether’s ability to freeze addresses.

USDT is one of the largest dollar-pegged stablecoins by market value and is widely used for trading and settlement on cryptocurrency platforms. A $42.4 million freeze is large for most retail holders but represents a small portion of total USDT supply. When an address is blacklisted, transactions remain visible on public ledgers but funds cannot be spent from affected addresses unless the issuer lifts the restriction.

The case will proceed through standard litigation steps, including exchange of evidence and legal arguments. The court will consider whether to restore control of the address, award damages, or dismiss the claims. The parties may resolve the dispute by settlement before a final judgment.