Two Thai businessmen, Nutthawat Rukthammachalern and Natthawat Kasamvilas, have filed a lawsuit against Tether in the U.S. District Court for the Southern District of New York, seeking the return of approximately 42.4 million USDT that remains frozen on the Ethereum blockchain.
Background to the Dispute
Tether, known for issuing the largest U.S. dollar-pegged stablecoin, exercised a smart contract function to blacklist ten Ethereum wallets holding a total of 42,417,785.62 USDT on October 30, 2025. The plaintiffs claim this action followed an informal request from a Homeland Security Investigations (HSI) agent, without a legal warrant, court order, or subpoena.
According to Rukthammachalern and Kasamvilas, the freeze became apparent during a failed transaction attempt. When they reached out to Tether about the incident, the company reportedly did not provide details about the legal grounds for the action but instead referred them to an HSI agent’s email.
The plaintiffs maintain they acquired the tokens through lawful secondary market transactions and emphasize that they have never held a direct account with Tether. They argue that Tether’s technical ability to control smart contracts does not equate to lawful ownership or authority over user-held tokens.
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AAPLMini dictionary: Tether is the issuer of USDT, the largest stablecoin pegged to the US dollar. It maintains the value of USDT by holding reserves and regularly collaborates with law enforcement in blockchain-based investigations.
Tether applied its smart contract blacklist tool after an HSI request, but Rukthammachalern and Kasamvilas contest that no formal legal procedure supported this freeze at the time.
Seizure Warrant and Ongoing Freeze
On February 19, 2026, a magistrate judge in North Carolina issued a seizure warrant instructing Tether to destroy the USDT held at the flagged addresses and reissue them to a government-controlled wallet. Days later, prosecutors announced the seizure of over $61 million in USDT linked to investment fraud schemes, including so-called pig-butchering scams.
Despite the seizure announcement, the lawsuit notes that the specific 42.4 million USDT associated with the two Thai businessmen had not been moved to a government wallet as of the date the lawsuit was filed. The plaintiffs assert that the subsequent February warrant cannot retroactively legitimize Tether’s initial October freeze.
| Date | Action | Amount (USDT) | Authority |
|---|---|---|---|
| October 30, 2025 | Wallets frozen | 42,417,785.62 | HSI (informal request) |
| February 19, 2026 | Seizure warrant issued | Over 61,000,000 | Magistrate judge |
| February 24, 2026 | USDT seized (total) | Over 61,000,000 | Federal prosecutors |
| July 31, 2026 | Additional return request | Not specified | North Carolina court |
Prosecutors identified the wallets as connected to investment fraud schemes and stated that the case began with a tip from a victim, leading investigators to trace funds through multiple addresses intended to obscure their origins.
Legal Arguments and Industry Context
The plaintiffs are seeking an injunction that would require Tether to remove the blacklist from their wallets, the return of their tokens if they still exist, or compensation for the value of the USDT if they have been destroyed or reissued. They also request damages for any income generated from the frozen funds.
Their central claim questions the legality of stablecoin issuers freezing assets in response to informal law enforcement requests lacking judicial review.
As of September 2, Tether has not issued a public response to the complaint. The lawsuit alleges conversion, trespass to chattels, and unjust enrichment against Tether.
Tether has reportedly frozen substantial sums before, including $514 million across 370 addresses within a single month in early 2026. This pattern has led to broader industry and legal debates about the extent of corporate discretion in freezing or seizing digital assets.
Separately, the plaintiffs told the New York court that they submitted a request in North Carolina on July 31 to recover their funds, but there has not yet been a decision on that application.
