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Cross-border payment company Conduit is taking Tether to court, accusing the stablecoin giant of unfreezing $2.76 million in its funds without just cause and refusing to do so for over a year.
In a complaint filed on Monday with the U.S. District Court for the Southern District of New York, Conduit claimed that Tether froze its wallet, which essentially functions as the company's digital operating bank account, on September 24, 2025. Since then, these funds have remained locked, while Tether has profited from the reserves that support these funds.
This lawsuit alleges claims including misappropriation, unjust enrichment, breach of fiduciary duty, and computer fraud, and seeks the return of the relevant funds.
At the heart of the controversy is a Brazilian investigation, which Conduit claims has nothing to do with them. According to the complaint, the Brazilian Federal Police were at the time investigating entities related to a company named Onix, and Onix had previously used the platform of Conduit.
However, Conduit indicates that its frozen wallet was created in May 2025, nearly a month after Onix made its last transaction on their platform, and it never held any Onix funds. The company stated that the Brazilian Federal Police confirmed that they had never flagged this wallet and were unaware of the criteria used to freeze it; on the contrary, it seems that it was an independent decision made by Tether themselves regarding their own T3 Financial Crime Unit.
Conduit believes that this freeze has dealt a heavy blow to its business. In the approximately four months before the wallet was locked, it processed over $1.1 billion in transactions. The company stated that the impairment of liquidity has forced it to lay off employees and close its offices.
Meanwhile, Conduit stated that Tether is still earning interest from US Treasury securities that support the frozen tokens, "reaping the financial benefits of this freeze" at no cost.
This case has further intensified the external scrutiny of Tether's arbitrary freezing of the powers of USDT.
Tether was also separately sued this year for freezing $42.4 million in funds; the company has also frozen hundreds of millions of dollars in tokens related to illegal activities. Tether recently, together with Circle, froze funds related to a hacker attack on Bitget.
Meanwhile, ironically, the company is also facing political pressure for not "freezing enough" assets. Senator Richard Blumenthal recently referred to USDT as a "superhighway" for circumventing sanctions, and pointed out that Iran is using such stablecoins. As the saying goes, it's hard to know what to do; either way, it's problematic.
