Gerstein Harrow LLP filed a motion requesting Tether redistribute $344 million in frozen USDt linked to Iranian entities to compensate victims of alleged Iranian state-sponsored terrorism spanning 25 years. The motion, filed May 15, claims plaintiffs are owed $532 million in compensatory damages and $1.8 billion in punitive damages related to historical violence allegedly sponsored by Iran. The frozen stablecoin sits in Tether’s custody following an April OFAC order targeting Iranian-linked addresses.
OFAC Freeze Triggers Competing Claims
In April, the US Office of Foreign Assets Control ordered Tether to freeze $344 million in USDt linked to Iranian entities. Gerstein Harrow filed its motion to redirect those funds toward judgment holders claiming damages from decades-old state-sponsored attacks. The law firm has a documented history of targeting cryptocurrency platforms post-breach, including previous actions against Harmony and Bybit following security exploits. The motion argues that frozen assets represent an available recovery mechanism for plaintiffs who have lacked other means to collect court-ordered damages.
Crypto Community Questions Legal Strategy
Onchain analyst ZachXBT publicly criticized the approach on May 1, stating the law firm’s strategy amounts to opportunistic litigation. “Whenever there’s a new Lazarus Group victim after an exploit and crypto assets get frozen, these clowns come in and say they have a claim for an alleged DPRK victim from 26 years ago that has zero relation to crypto or exploits,” ZachXBT said on X. The timeline raises a core conflict: recent hack victims, including those affected by the $293 million Kelp DAO exploit in April, argue they have a stronger claim to frozen assets than holders of historical terrorism judgments with no connection to the crypto ecosystem.
Centralized Freezes and Regulatory Authority Debate
The motion highlights an ongoing tension over whether stablecoin issuers should function as enforcement agents for non-crypto litigation. Tether’s T3 Crime Unit froze an additional $450 million in May, signaling expanding enforcement scope. The case raises questions about how frozen assets should be prioritized when multiple claimants exist. Crypto participants argue that recent exploit victims should receive priority over unrelated historical judgments, particularly when the frozen assets have no direct connection to the underlying claims.
Next Steps Remain Unclear
Tether has not publicly responded to the motion as of publication. The current status of the $344 million freeze is unknown. Kelp DAO announced plans to reopen withdrawals on May 13, though recovery of lost user funds remains uncertain. The case will test whether courts prioritize historical terrorism judgments or recent hack victim compensation when distributing frozen crypto assets.
