Terrorism victims sue Tether over $344M in USDT

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Terrorism victims sue Tether

Highlights

The plaintiffs are seeking 344,149,759 USDT frozen on two Tron addresses.
The addresses were identified by OFAC as tied to Iran’s Islamic Revolutionary Guard Corps.
Tether previously confirmed the freeze of more than $344 million in USDT in coordination with OFAC and U.S. law enforcement.
The case could test whether courts can not only freeze crypto assets but also redirect them to judgment creditors.

The case against Tether

According to CoinDesk, the filing was submitted in the U.S. District Court for the Southern District of New York. The plaintiffs, including victims and families affected by Iran-backed terrorism, are seeking to enforce U.S. court judgments that have left them owed billions of dollars. In the new motion, they ask the court to order Tether to cancel the blocked tokens and reissue an equivalent amount to a wallet controlled by their lawyer.

At issue is 344,149,759 USDT held on blocked Tron addresses. 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.

Tether said in April that it supported the freeze of more than $344 million in USDT across two addresses after U.S. authorities identified the wallets. The company described the action as part of its coordination with OFAC and U.S. law enforcement.

A new enforcement strategy through crypto infrastructure

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. That capability is central to the plaintiffs’ request: if Tether can stop the movement of funds, they argue, a court can order the company to redirect those funds to creditors.

The move extends a broader legal strategy Gerstein has already pursued. He previously used a similar approach in a dispute over funds frozen by Arbitrum after the KelpDAO hack, as well as in a separate case involving the privacy protocol Railgun DAO. The Arbitrum case is more complex because the parties dispute whether stolen assets ever legally became the property of the hackers. In the Tether case, the plaintiffs argue the ownership question is clearer because the addresses already appear in a sanctions context.

A precedent for stablecoins

The case matters for the wider stablecoin market because it tests the limits of issuer control. Tether has already frozen more than $344 million in USDT on two addresses. The court must now decide whether that control can become a mechanism for enforcing judgments. If the request succeeds, frozen crypto assets could become a more practical source of compensation for victims of terrorism and sanctions-linked regimes.

For Tether, the risk is not only financial. A court order could increase pressure on centralized stablecoin issuers that already work with sanctions lists and law enforcement agencies. For the crypto market, the message would be clear: assets that can be frozen at the issuer level may increasingly be treated by courts as property available for seizure.

As previously covered, Tether reports a $1 billion profit, and a record reserve buffer.

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