Cross-border payments company Conduit Technology has filed a lawsuit against Tether in the U.S. District Court for the Southern District of New York over $2.76 million in USDT that has remained frozen since September 2025. According to the complaint filed on October 5, 2025, Conduit alleges that Tether froze the funds "with no justifiable basis" and has refused to restore access despite the company's requests. The case names Tether Holdings, Tether International, Tether Operations and Tether Investments as defendants, with Conduit seeking restoration of access, at least $2.76 million in damages, punitive damages, and disgorgement of interest Tether earned on the reserves backing the frozen tokens. As reported by multiple sources, Conduit alleges that Tether froze the wallet without authority and then refused to provide a justification for the restriction, while the company argues the wallet functioned as the equivalent of its operating bank account. The lawsuit asserts that Conduit owes Tether no money and has no obligations to Tether, emphasizing the company's position that it has no financial relationship with the stablecoin issuer.
The dispute traces back to a Brazilian Federal Police investigation opened in 2024 into financial intermediary Bull Intermediação de Negócios and related company Onix Intermediações. As reported by crypto.news, Conduit previously provided payment services to Onix, but the relationship ended on April 22, 2025, nearly a month before Conduit created the treasury wallet at the center of the case on May 20. The company claims neither Onix nor Bull owned the wallet, deposited money into it, or used it for transactions. According to the complaint, Brazilian police shared a set of suspected cryptocurrency addresses with Tether's T3 Financial Crime Unit during the investigation, but Conduit's address was absent from that list. Conduit alleged that Tether's T3 Financial Crime Unit acted without authority and without any compliance issue tied to Conduit, and the unit selected the wallet using undisclosed criteria. However, ChainCatcher reports that law enforcement authorities have confirmed they never requested the freezing of this payment provider's wallet, and Brazilian courts have also confirmed that Conduit is not under investigation in connection with Onix Intermediações. The Brazilian Federal Police began investigating individuals and entities related to Bull Intermediação de Negócios in June 2024, and Tether froze Conduit's treasury wallet alongside others tied to that probe, according to the filing. As reported by AMBCrypto, Conduit acknowledged there was an ongoing investigation into Onix transfers using the Conduit platform, but Brazilian authorities denied ordering the stablecoin issuer to freeze its funds.
USDT differs from cryptocurrencies such as Bitcoin because Tether retains technical controls that can prevent tokens held at selected addresses from moving. According to the lawsuit, Tether blacklisted the wallet on September 24, 2025, and at the end of September 2026, the address still held approximately $2.76 million in USDT. Tether's published terms state it can freeze tokens when required by law or government authorities, when an address is connected to an investigation, or when the company considers restrictions prudent under its policies. Conduit argues that Tether had no ownership claim to its USDT and says no enforceable contract between the parties authorized the freeze. The dispute centers on whether Tether's freeze authority extends beyond compliance problems tied to Conduit itself, with Conduit seeking a declaratory judgment that Tether lacks the legal authority to freeze its assets. Conduit uses stablecoins, including Tether's USDT and Circle's USDC, to transfer funds across more than 100 countries, making the frozen wallet particularly significant for its global operations. As reported by Bitcoin.com News, Conduit claims that "Tether acted on its own initiative, through its T3 Financial Crime Unit, based on its own private criteria."
Before Tether blocked the wallet, Conduit used the account to hold capital needed to support international payments. According to the complaint, the address handled 4,427 transactions involving 78 counterparties and more than $1.1 billion between May and September 2025. Conduit claims losing access to $2.76 million reduced the liquidity available for pre-funding payment routes, linking the restriction to lower transaction capacity, layoffs and office closures. The company's lawyers contacted Tether in June before sending a formal demand on August 19 that gave the stablecoin company five business days to remove the restriction. Conduit alleges the freeze hindered its ability to pre-fund and settle client transactions, and it fired employees and closed offices as a result of losing access to the USDT. Since this wallet supported the company's operations, ChainCatcher reports that Conduit's business has been adversely affected, while Tether continues to earn interest on the reserves backing the frozen USDT. Founded in 2021, Conduit runs a cross-border payments platform that lets companies move between fiat currencies, and the frozen wallet held only its own working capital.
This lawsuit represents the second lawsuit against Tether in less than two months, with both cases involving parties under investigation. As reported by AMBCrypto, last month a duo sued Tether for $42.4 million in frozen USDT and demanded all the earned interest income plus the initial capital. In late September, the U.S. Senate released a damning report claiming Tether's USDT is a key enabler of Iran's illicit crypto flows, with Tether defending that it had frozen over half a billion dollars tied to the Iranian regime. Tether's USDT remains the world's largest stablecoin with $184 billion in market supply, but analysts question whether ongoing regulatory pressure and scrutiny will reduce its global dominance. According to AMBCrypto, security expert Taylor Monahan suggested that "Brazilian authorities have their wires crossed on what they demanded be frozen" or that Conduit is being selective with its portrayal to US courts. The next procedural steps will include service of the lawsuit and a response from Tether, with the case potentially moving into dismissal proceedings, discovery or another early-stage motion before the court considers Conduit's underlying claims.
