Cross-border payments company Conduit filed suit against Tether in U.S. District Court for the Southern District of New York, alleging the stablecoin issuer froze $2.76 million in Conduit’s treasury wallet on September 24, 2025, without justification and has refused to release it for more than a year.
Conduit’s frozen wallet served as its digital operating bank account. The wallet processed $1.1 billion in volume across roughly four months before the lock, according to the complaint. Conduit alleges the freeze was triggered by a Brazilian Federal Police investigation into Onix, a separate firm that had once used Conduit’s platform. Conduit’s wallet was created in May 2025, nearly one month after Onix’s last transaction on the platform.
Brazil’s Federal Police confirmed they never flagged Conduit’s wallet, according to the lawsuit. Tether’s T3 Financial Crime Unit independently made the freeze decision without coordination with Brazilian authorities.
The freeze forced Conduit to lay off employees and close offices. In court filings, Conduit alleged Tether is “reaping the financial rewards” from the frozen reserves. Tether continues to earn interest on U.S. Treasury securities backing the frozen tokens, the complaint states.
Tether has not publicly stated its rationale for the freeze. The company has a history of freezing hundreds of millions in tokens flagged for illicit activity. In a separate case, Tether and Circle recently froze funds tied to the Bitget hack. Tether separately faces a $42.4 million freeze lawsuit.
The Conduit case highlights the unilateral power stablecoin issuers hold over user assets. U.S. Senator Richard Blumenthal has criticized USDT as a “superhighway” for sanctions evasion, citing Iran’s use of the stablecoin. Conduit’s lawsuit raises questions about the standards and transparency governing such freezes in the stablecoin ecosystem.
