Tether is now facing a lawsuit in the Southern District of New York that could set a new standard for how and when stablecoins can be frozen. Two Thai businessmen allege that Tether blacklisted 10 Ethereum wallets holding $42.4 million in USDT on October 30, 2025, after receiving an informal request from a Homeland Security agent, without waiting for a court order, subpoena, or any kind of judicial directive.
What matters here isn’t just that the freeze happened, but the legal trigger: the plaintiffs claim that an informal government ask, without formal legal process, wasn’t enough for Tether to lock their tokens. Tether has long marketed its ability to block tokens as a core anti-fraud or sanctions compliance tool, but the challenge here is over how much independent discretion a stablecoin issuer can use before getting a judge involved, especially when the parties locked out have no direct contract with the company.
The later February 2026 court order that directed Tether to burn and reissue those tokens came months after the initial freeze. The lawsuit says that does not retroactively justify the early lockout.
While prosecutors have raised much larger sums in broader investigations, this case is tightly focused: it asks whether a private issuer can freeze assets on just a government request, or needs formal legal authority each time. Any decision could clarify what compliance really means for stablecoin freezes going forward.