Conduit, a cross-border payments company that uses stablecoins to move funds internationally, has sued Tether in the US District Court for the Southern District of New York, alleging the USDT issuer froze $2.76 million from its treasury wallet for more than a year without releasing the funds or explaining the basis for the block.
The complaint seeks the return of the frozen USDT plus at least another $2.76 million in damages and profits that Conduit alleges Tether earned from reserves supporting the blocked tokens. The case places a corporate treasury dispute at the center of a larger practical question for businesses using centrally issued stablecoins: a blacklist function can cut off access to operating capital even when the wallet holder disputes any connection to the underlying investigation.
Conduit says the wallet served as the equivalent of its operating bank account and was used to support payments activity across more than 100 countries. In the four months before the September 2025 freeze, the company says the account processed 4,427 transfers worth a combined $1.1 billion.
The company names Tether Holdings S.A. de C.V. and Tether Investments S.A. de C.V. among the defendants. Tether Chief Executive Officer Paolo Ardoino had not publicly addressed Conduit’s specific allegations at the time of the filing described in the complaint.
Conduit links freeze to Brazilian police inquiry
Conduit ties the wallet freeze to an investigation involving Onix Intermediações, a former customer of the payments firm, and a request sent to Brazil’s Federal Police. The complaint argues that the authorities did not identify Conduit’s treasury wallet as an address to be frozen.
The payments company further alleges that a Brazilian court confirmed Conduit itself was not under investigation in the matter. According to the filing, Onix had not used Conduit’s platform since April 2025, roughly one month before the disputed treasury wallet was created.
Conduit says its wallet never received or held Onix funds. It also says it does not owe Tether money and has no contractual obligation that would justify retaining the USDT.
Those assertions will be tested in court, where Tether could present its own account of the freeze, including whether it acted on requests from law enforcement, compliance concerns, or other legal obligations. The complaint seeks a judicial order requiring the release of the tokens, alongside monetary relief.
The case does not establish that Tether acted improperly. It does offer a detailed example of the operational strain that can emerge when a stablecoin issuer freezes an address used for daily business payments rather than a wallet holding idle digital assets.
A freeze can halt spending at the token level
USDT is a centrally issued stablecoin, meaning Tether retains the ability to blacklist wallet addresses through the token’s smart-contract controls. When an address is blacklisted, the holder may retain a visible token balance on the blockchain but cannot transfer those tokens through the USDT contract.
That function is designed to help stop stolen assets, fraud proceeds, sanctions evasion, and other illicit transactions. Tether has previously said it cooperates with law-enforcement agencies and freezes addresses connected to criminal activity or official enforcement actions.
For a payments company, though, a blocked treasury wallet can create immediate pressure on payroll, settlement obligations, customer disbursements, and liquidity management. Conduit’s allegation that the wallet was its operating account gives the dispute a more consequential profile than a typical claim over an individual trading balance.
The company says the freeze disrupted its operations while Tether continued earning returns on the assets held in reserves backing the USDT. Stablecoin issuers generally hold reserves against circulating tokens in cash, Treasury bills, repurchase agreements, and similar instruments. Conduit’s claim for profits appears aimed at the income it alleges Tether received while the company could not use the corresponding tokens.
Whether a court accepts that theory may depend on the legal relationship between an issuer and a USDT holder, the terms governing redemption, Tether’s authority to block an address, and the legal basis for the original freeze.
Treasury concentration becomes a business risk
The lawsuit underscores why companies handling high payment volumes often treat stablecoin access as a treasury-management issue rather than solely a blockchain or compliance matter. A stablecoin balance may settle quickly and move across borders at any hour, but access depends on both control of the wallet’s private keys and the issuer’s policies.
Self-custody does not eliminate that issuer-level risk for centrally managed tokens. A company can hold its own wallet keys yet remain unable to move a blacklisted stablecoin. In Conduit’s account, the inability to transfer USDT allegedly persisted despite the company’s claim that Brazilian authorities had not directed a freeze of its wallet.
Firms that depend on stablecoins for settlement may therefore need to weigh concentration risks across issuers, banks, fiat liquidity, custody arrangements, and payment rails. Maintaining alternative settlement channels would not resolve a disputed freeze, but it could limit the disruption caused by losing access to one token or wallet.
Conduit’s suit will now test the extent to which a US court is willing to scrutinize an issuer’s decision to immobilize tokens where the wallet holder claims it was wrongly connected to an investigation. A ruling requiring release, damages, or neither would offer a clearer view of how commercial claims over frozen stablecoin balances may be handled under US law.
Concerned about frozen stablecoins and cross-border risk? Explore how global rules are changing in this stablecoin regulation deep-dive.
Disclaimer: The content on this page is provided for general informational purposes only and does not represent the views or financial advice of Toobit. We make no guarantees regarding the accuracy or completeness of this information and shall not be held liable for any errors, omissions, or outcomes resulting from its use. Investing in digital assets involves risk; users should independently evaluate their financial situation and the risks involved. For further details, please consult our Terms of Service and Risk Disclosure.
