Conduit sues Tether over $2.76M frozen USDT: ‘No justifiable basis to withhold money’

Background

Conduit, a US-based payment firm, has filed a lawsuit against Tether, alleging that the stablecoin issuer froze its $2.76M USDT without a justifiable basis. Tether has refused to return the funds or provide a justification, and Conduit continues to earn interest income on the reserve assets backing the frozen USDT.

Investigation and Allegations

The lawsuit claims that Tether froze the funds on the 24th of September, 2025, after being referred by the Brazilian Federal Police for details on the seizure. However, the Brazilian authorities denied ordering the stablecoin issuer to freeze its funds. Conduit has defended the wallet as a treasury wallet that was formed a month after Onix's last transaction on the platform.

Expert Analysis

Taylor Monahan, a prominent security and blockchain expert, has reacted to the situation, stating that the Brazilian authorities may have their wires crossed on what they demanded be frozen and/or aren't communicating with Conduit well. He also questioned whether Conduit is being selective with their portrayal of the situation to US courts.

Regulatory Pressure

The lawsuit marks the second time in less than two months that Tether has faced a lawsuit related to frozen USDT. The US Senate has also released a damning report, claiming Tether's USDT is a key enabler of Iran's illicit crypto flows. Tether has defended itself by stating that it has frozen over half a billion dollars tied to the Iranian regime.

Market Impact

It remains to be seen whether the ongoing regulatory pressure and scrutiny will reduce Tether's global dominance. With $184B in market supply, Tether's USDT is the world's largest stablecoin.