Tether Hit With Lawsuit Over $2.76 Million Stablecoin Freeze

Conduit filed suit in the U.S. District Court for the Southern District of New York alleging Tether unjustly froze $2.76 million in its treasury wallet on Sept. 24, 2025 and has declined to return the funds for over a year. The complaint asserts claims including conversion, unjust enrichment, breach of fiduciary duty and computer fraud, and seeks the release of the locked tokens. Conduit says the freeze came in the context of a Brazilian federal police investigation into entities tied to a firm called Onix, which had previously used Conduits platform. The company alleges its treasury wallet was created in May 2025—nearly a month after Onixs last transaction—and never held funds tied to Onix. According to the filing, Brazils Federal Police confirmed they did not flag Conduits wallet and do not know the criteria Tether used to block it; Conduit points to Tethers T3 Financial Crime Unit as having taken the action on its own initiative. Conduit contends the freeze severely damaged its operations, noting the wallet processed more than $1.1 billion in volume over about four months before being locked and saying the loss of liquidity forced layoffs and office closures. The company also alleges Tether has continued to earn interest on the U.S. Treasury securities that back the frozen USDT, effectively benefiting from the reserves while Conduit remained unable to access its funds. The lawsuit adds to an ongoing debate over Tethers authority to freeze USDT. The company has faced other litigation this year over a separate $42.4 million freeze, has previously frozen hundreds of millions of tokens flagged for illicit activity, and recently worked with Circle to freeze funds tied to the Bitget hack. Lawmakers have also criticized Tether; Sen. Richard Blumenthal has warned USDT can be used to evade sanctions, illustrating the regulatory and political scrutiny around stablecoin controls.