US Senator Blumenthal Calls Tether's USDT a 'Superhighway' for Iranian Sanctions Evasion

Sen. Richard Blumenthal's subcommittee published a report titled "Tethered to Terrorism" concluding that a large majority of cryptocurrency wallets sanctioned or targeted for seizure for links to Iran relied chiefly on Tether's USDT stablecoin. Democratic staff on the Senate Permanent Subcommittee on Investigations examined blockchain records for 846 wallets that had been designated by the U.S. Treasury's Office of Foreign Assets Control (OFAC) or Israel's National Bureau for Counter Terror Financing between June 2021 and August 2026, and found 84% transacted exclusively or nearly exclusively in USDT.

The report separates the two designation sources, finding 87% of the 757 wallets designated by the Israeli bureau transacted predominantly in USDT, while 57% of the 101 OFAC-designated wallets did so. It highlights two Iranian oil smugglers, Alireza Derakhshan and Arash Estaki Alivand, who the subcommittee says moved more than $603 million in USDT from 2021 to 2025 through a network that reached Hizballah, the Houthis and Iranian financial institutions; the report also identifies evidence that the same network facilitated purchases and sales of drones and other military equipment.

The subcommittee criticizes Tether's historical approach to sanctions compliance, stating that before 2024 the company did not "comprehensively and consistently freeze" wallets designated by counter-terrorism agencies and citing a case where $34.6 million continued to move through wallets after designation. The report notes Tether has described its sanctions compliance as "voluntary" and said it follows OFAC "guidelines," contrasting that with legal obligations placed on banks. It also reports a shift by Hamas away from Bitcoin and assorted tokens toward promoting USDT.

Blumenthal has written to Treasury Secretary Scott Bessent and Attorney General Todd Blanche requesting investigations into Tether's anti-money-laundering and sanctions compliance, and accused the administration's oversight of crypto firms of undermining national security interests. The subcommittee additionally raised connections to Cantor Fitzgerald, which owns 5% of Tether and holds a large share of its assets, noting the firm was run until recently by Commerce Secretary Howard Lutnick and is now controlled by his children; the report cites Bloomberg reporting that Tether financed those children’s buyout of their father's stake. Tether issued a statement the same day saying it had frozen roughly $550 million across wallets U.S. authorities linked to Iran's central bank during 2026 and that its total frozen holdings across cases exceed $4.9 billion, while its CEO emphasized public blockchains provide authorities visibility into fund movements.