Former Ripple Chief Technology Officer David Schwartz has voiced support for Tether amid an ongoing legal battle concerning the freeze of $42.4 million in USDT. The lawsuit, brought by a group of Thai entrepreneurs, challenges the stablecoin issuer’s actions in the U.S. District Court for the Southern District of New York (SDNY).
Lawsuit over frozen Tether assets
Thai business owners filed legal action after Tether froze 10 wallets holding a total of 42,417,785.62 USDT, citing an informal request sent on October 30, 2025, by U.S. Homeland Security Investigations (HSI). The intervention was part of an international probe into a pig-butchering scam, a type of fraudulent scheme where victims are lured and defrauded of large sums.
Authorities formally authorized the fund seizure nearly four months later, on February 19, 2026, but the initial freeze took place without a court order. The plaintiffs argue that they bought the tokens legitimately on the secondary market, and now seek to recover both access to the assets and any lost profits along with the interest income that Tether earned from reserve management during the freeze.
Tether’s actions to freeze the wallets followed an informal HSI request related to an international fraud case. Plaintiffs contend they acquired the USDT legally and request that restrictions be lifted and additional compensation provided.
Schwartz defends Tether’s approach
David Schwartz, known for his key role in developing the XRP Ledger, commented that Tether’s response was justified both administratively and legally. He explained that when questions exist regarding rightful ownership, asset issuers like Tether must secure the funds until a court clarifies the dispute. According to Schwartz, this protocol aims to prevent double liability—a situation in which multiple parties claim the same assets.
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AAPLSchwartz also suggested that ignoring early warnings from agencies like HSI would have enabled fraudsters to rapidly move the assets through obfuscation tools, potentially exposing Tether to legal charges of enabling money laundering or facilitating crime.
Mini dictionary: Pig-butchering scam, a form of investment fraud in which criminals build fake romantic or business relationships to trick victims into making large financial transfers that are then stolen.
Schwartz highlighted that stablecoin issuers face risks from both sides: potential lawsuits from users because of asset freezes without court orders, and the threat of criminal prosecution if they fail to cooperate with regulators.
Potential regulatory impact
The SDNY case spotlights a major dilemma for stablecoin companies. They can be subject to lawsuits from users when acting on law enforcement requests ahead of judicial authorization, while also risking criminal liability if they ignore such warnings.
Tether, which issues the widely used USDT stablecoin, is currently defending its internal policy of restricting accounts based on its Terms of Service prior to the issuance of a court order. The court’s upcoming decision is expected to clarify whether such a policy grants legal authority to freeze assets preemptively.
The outcome may set a precedent for the cryptocurrency sector, affecting how stablecoin issuers respond to regulatory requests and protect user assets under scrutiny.
