Conduit Sues Tether Over $2.76 Million USDT Wallet Freeze

Conduit Technology has filed a lawsuit against Tether in the US District Court for the Southern District of New York, alleging that Tether improperly froze $2.76 million in USDT from its treasury wallet. The dispute began when Conduit created the wallet on May 20, 2025, to hold working capital, but lost access to the funds on September 24, 2025. Conduit claims the freeze lasted over a year without any valid reason provided by Tether. The lawsuit names four Tether entities as defendants, including Tether Holdings, Tether International, Tether Operations, and Tether Investments S.A. de C.V.

Conduit argues that the freeze violated Tether’s Terms of Service, which allows Tether to freeze tokens held by a user, but questions how far this discretion extends. The company claims the freeze was unjustified and that Tether’s T3 Financial Crime Unit acted without authority. Conduit also alleges that its wallet was not linked to any investigation by Brazilian Federal Police, despite Tether’s claims. The company seeks a declaratory judgment to invalidate the freeze, the return of its funds, and damages for the financial harm caused.

Conduit claims the freeze disrupted its ability to pre-fund and settle client transactions, leading to layoffs and office closures. The lawsuit includes allegations of conversion, unjust enrichment, breach of fiduciary duty, and computer fraud. Conduit also demands an accounting of the revenues generated from the frozen USDT and the reserves backing the tokens. As of now, no court ruling has been issued, and Tether has not publicly responded to the allegations.

The coverage of the lawsuit varies, with some outlets emphasizing the potential profits Tether may have made from the frozen reserves, while others focus on the unresolved freeze and Tether’s refusal to unfreeze the funds. The case highlights the broader debate over the authority and discretion stablecoin issuers like Tether hold in managing user funds.