Conduit sues Tether in New York to recover $2.76 million in USDT frozen for over a year

U.S. payments company Conduit Technology has sued Tether in federal court in New York, seeking the return of $2.76 million in USDT that the stablecoin issuer froze more than a year ago. In a complaint filed Oct. 5 in the U.S. District Court for the Southern District of New York, Conduit said Tether "has no legal entitlement to these funds and no claim to them." According to the complaint, Tether never gave Conduit a reason for the freeze.

The defendants are four El Salvador-based entities, including Tether Holdings. Conduit is asking the court to order the funds unfrozen and to award damages of at least $2.76 million, disgorgement of the interest Tether earned on the reserves during the freeze, punitive damages and a jury trial.

A wallet that was not on the police list

The wallet at issue is an address on the Tron network that Conduit used to hold its working capital. The complaint describes it as a corporate treasury wallet that was not used for customer transactions, with signing authority held only by Conduit employees. In the four months before the freeze, the wallet processed 4,427 transactions with 78 counterparties and more than $1.1 billion in volume.

The freeze is tied to an investigation by Brazil's Federal Police. Investigators looking into intermediary BULL and its affiliate Onix passed a list of suspicious wallets to Tether, and Conduit says its wallet was not on that list. Onix once used Conduit's platform, but its last transaction came about a month before the wallet was created, according to the filing. The complaint also states that a Brazilian criminal court acknowledged Conduit is neither a target of the investigation nor among the companies whose assets were ordered frozen.

1. June 2024Brazil's Federal Police open an investigation tied to BULL
2. April 22, 2025Onix makes its last transaction on Conduit's platform
3. May 20, 2025Conduit opens the wallet to hold its working capital
4. Sept. 16, 2025Federal Police analysis report is produced; it does not name Conduit or its wallet
5. Sept. 24, 2025Tether freezes the USDT in Conduit's wallet
6. June 10-23, 2026Conduit asks for the funds to be released at least four times
7. July 1, 2026Federal Police file a submission saying a Tether unit chose the wallets to freeze using its own criteria
8. Aug. 19, 2026Conduit's lawyers send a letter demanding the freeze be lifted within five business days
9. Oct. 5, 2026Lawsuit filed in the Southern District of New York

Tether's financial crime unit made the call, Conduit says

The core of the complaint is the claim that Tether, not the police, decided on the freeze. Citing the Federal Police's July 1 submission, Conduit said investigators identified suspicious addresses from cloud data and forwarded them in a virtual meeting to T3 FCU, Tether's financial crime unit, which then used its own criteria to decide which wallets to freeze. Conduit said its wallet was not on the list the police originally passed along, and that the police confirmed they do not know what criteria Tether applied.

Conduit said that each time it asked for the funds to be released, Tether either said it was following up on the inquiry or referred it to a contact at the Brazilian police, and that Tether did not respond to the August letter. The complaint also says the freeze left Conduit unable to process client transactions at its previous volume, forcing it to lay off employees and close offices. Tether has not yet commented on the lawsuit. Cointelegraph reported that it reached out to Tether for comment but did not receive an immediate response.

Tron blockchain records also show the address was added to the USDT contract's blacklist on Sept. 24, 2025, at 6:24 p.m. KST, when it held about 2.756 million USDT. The freeze remained in place as of Oct. 7.

Same court saw a freeze lawsuit a month earlier

Tether was also sued in the same court early last month over a USDT freeze. According to Decrypt, two Thai businessmen filed a lawsuit challenging the freeze of $42.4 million in USDT. They alleged the tokens were frozen without a warrant, based only on an informal request from an agent of U.S. Homeland Security Investigations (HSI). Tether called that suit "a baseless attempt to interfere with Tether's important work with global law enforcement."

USDT also trades on the Korean won markets of Upbit and Bithumb. At 12:33 p.m. KST on Oct. 7, USDT traded at 1,360 won on Upbit and 1,359 won on Bithumb. The won-dollar exchange rate tracked by Coinyong at the same time was 1,338.92 won, putting the Korean USDT price about 1.6% above that exchange rate.