Tether Has Frozen $3.5 Billion in Crime-Linked Stablecoins Since 2023

Tether’s ability to blacklist wallet addresses, burn USDT and reissue tokens gives the stablecoin operator unusual control over assets marketed as freely transferable on public blockchains. The dispute stems from an alleged $61 million “pig butchering” investment-fraud operation and could test how far a private issuer may go in assisting law enforcement before judicial authorization is obtained, with implications for token-holder rights and the legal status of centralized stablecoins.

Thai businessmen Nutthawat Rukthammachalern and Natthawat Kasamvilas sued Tether in federal court in New York on Aug. 31, 2026. They allege the company froze 42.4 million USDT in October 2025 after an informal request from U.S. Homeland Security Investigations, months before the Eastern District of North Carolina issued a seizure warrant in February 2026. The plaintiffs seek removal of the blacklist, an order preventing Tether from burning and reissuing the tokens, and punitive damages. Tether called the lawsuit baseless.

USDT is a U.S. dollar-pegged stablecoin centrally issued by Tether. Even when it circulates on the public Tron blockchain, the issuer can blacklist designated addresses to prevent transfers or redemptions. The case shows that the U.S. Treasury Department's Office of Foreign Assets Control, or OFAC, can work with industry participants to trace sanctions evasion and criminal funds. It also underscores that such "digital dollars" remain subject to law enforcement action.

On April 23, 2026, Tether froze more than 344 million USDT across two Tron addresses at the request of OFAC and U.S. law enforcement agencies. The addresses held approximately 212.9 million and 131.3 million USDT, respectively. On May 15, U.S. law firm Gerstein Harrow LLP filed a court motion seeking the turnover and distribution of the Iran-linked assets to existing judgment creditors.