Victims holding unpaid U.S. terrorism judgments against Iran have asked a federal court in Manhattan to order Tether to transfer 344,149,759 USDT frozen in two OFAC-blocked Tron wallets linked to Iran's Islamic Revolutionary Guard Corps. According to reports from CoinCentral, Attorney Charles Gerstein filed the motion in the U.S. District Court for the Southern District of New York on Thursday, seeking control of the frozen Tether USDT stablecoins. The plaintiffs seek to enforce judgments tied to attacks linked to Iran-backed groups, with the case potentially testing whether courts can not only freeze crypto assets but also redirect them to judgment creditors. The filing argues that Tether has the technical ability to act because it has frozen and reissued USDT in earlier law enforcement cases.
The wallets were frozen after OFAC sanctioned Iran-linked crypto addresses on April 24. As reported by CoinCentral, Tether froze about $344 million in USDT across two Tron addresses after U.S. authorities linked them to the IRGC and Central Bank of Iran networks. TRM Labs data revealed that the two wallets received about $370 million across nearly 1,000 transactions since March 2021, with most funds staying dormant after late 2023 in what the firm described as reserve storage rather than active use. Tether previously confirmed the freeze of more than $344 million in USDT in coordination with OFAC and U.S. law enforcement, describing the action as part of its coordination with OFAC and U.S. law enforcement.
The filing argues that Tether has the technical ability to act because it has frozen and reissued USDT in earlier law enforcement cases. According to CoinCentral, Gerstein's argument rests on a key feature of USDT - unlike Bitcoin or Ethereum, Tether is issued by a centralized company that can blacklist addresses, freeze wallets and, in some cases, cancel and reissue tokens. The filing states that Tether "has the technical ability to burn and reissue the blocked tokens." Gerstein argues that because the funds were already frozen after sanctions action linked them to Iran's Islamic Revolutionary Guard Corps, they can be treated as property of a state sponsor of terrorism and used to satisfy court judgments. The move extends a broader legal strategy Gerstein has already pursued, including similar approaches in disputes over funds frozen by Arbitrum after the KelpDAO hack and in a separate case involving the privacy protocol Railgun DAO.
The plaintiffs include survivors and relatives of individuals related to terrorism against Iran, including a family from Jerusalem that lost relatives in a 1997 Hamas suicide bombing. As reported by CoinCentral, it has been decades since those cases were awarded, and their judgments haven't been paid. The plaintiffs contended that the ownership dispute was not as hotly contested since OFAC had already labeled the Tron wallets as IRGC-controlled assets, allowing the blocked USDT to be seized under U.S. terrorism laws. The case is part of a larger legal initiative that Gerstein is waging against digital asset platforms that can freeze or divert cryptocurrencies, with similar allegations made in court actions related to North Korea-related cyber operations against the Arbitrum platform. The plaintiffs describe themselves as victims of acts of terrorism committed or facilitated by Iran, with the filing noting they have collectively won judgments worth $552.3 million in compensatory damages and $1.86 billion in punitive damages, but Iran has paid nothing toward those awards.
The latest filing is part of a broader lawsuit against North Korea (DPRK) and Iran, attempting to claim and redistribute digital assets as compensation for victims of various and unrelated judgments tied to state-sponsored violence. However, the law firm's tactics have drawn condemnation from the crypto community, with critics arguing that distributing funds owed to hack victims to satisfy unrelated judgments stretching back decades delays repayment for hack victims, who have a greater claim to the funds. In May, the law firm filed a restraining notice against the Kelp decentralized autonomous organization (DAO), attempting to block the transfer of frozen Ether tied to the $293 million Kelp exploit in April. Onchain sleuth ZachXBT has criticized the law firm, calling it "a predatory US law firm with a strategy that is pure evil," arguing that the firm uses cybersecurity research to justify claims for alleged DPRK victims from 26 years ago that have zero relation to crypto or exploits/hacks. A judge must still decide whether Tether can be compelled to transfer the funds under New York turnover rules and federal terrorism enforcement laws.
