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Crypto payments firm Conduit has filed a lawsuit against Tether in a New York court, claiming the stablecoin giant unlawfully froze $2.76 million in USDT back in September 2025 — and hasn’t returned a single dollar since.
Why It Matters
This lawsuit highlights the ongoing tensions between crypto firms and regulatory bodies, particularly in terms of asset accessibility and transparency. As stablecoins like USDT play a crucial role in facilitating liquidity across the crypto markets, the outcome of this case could have broader implications for user trust and regulatory scrutiny within the industry. Furthermore, it underscores the challenges that companies face when dealing with law enforcement in different jurisdictions, which may impact their operational strategies and risk management.
The freeze has been sitting there for over a year now. Conduit says it made repeated requests to get the funds back, and each time it was basically told to go talk to the Brazilian Federal Police. No explanation. No criteria. Nothing. And here’s the kicker: Brazilian police have reportedly confirmed they never asked for Conduit’s wallet to be frozen in the first place. They say they’re unaware of whatever internal logic Tether used to justify the action. That’s a pretty significant detail — the authority Tether apparently pointed to as justification seems to have no idea what’s going on.
The Brazilian Connection Tether Didn’t Explain
The freeze isn’t random. It’s tied to a Brazilian investigation involving a company called Onix Intermediações Ltda, which used Conduit’s platform at some point. Onix shares ownership with another firm, Bull Intermediação de Negócios Ltda, and both are under police scrutiny in Brazil. So there’s a real investigation happening — that part’s not disputed.
But Conduit’s argument cuts to a specific point. Onix, it says, had zero interactions with the treasury wallet that Tether froze. And not just zero interactions — the treasury wallet didn’t even exist during the period when Onix was using Conduit’s platform. So the connection Tether drew between Onix’s activity and Conduit’s frozen wallet seems, at minimum, hard to follow. Conduit’s legal filing basically says Tether acted on its own, without disclosing any criteria, and without giving Conduit a real path to challenge or understand the decision.
That lack of transparency is a central thread running through the whole lawsuit. Conduit isn’t just angry about the money being frozen. It’s angry about the silence. No disclosed criteria. No clear rationale. Just a referral to Brazilian authorities who, when contacted, apparently had nothing to say about it.
Job Cuts, Office Closures, and the Legal Demands
The business damage, according to Conduit, has been real and serious. The firm says the frozen $2.76 million has directly impaired its ability to pre-fund and settle client transactions. That’s kind of the core function of a crypto payments company — if you can’t move money to settle deals, you can’t operate properly. And Conduit claims that’s exactly what happened. The operational strain allegedly forced the company to cut jobs and shut down certain offices. It didn’t specify how many employees were let go or which offices closed, but the picture it paints isn’t pretty.
The legal claims themselves are wide-ranging. Conduit is going after Tether on conversion and unjust enrichment grounds. It’s also accusing Tether of breaching fiduciary duty and — notably — engaging in computer fraud. Those are serious allegations. The lawsuit seeks compensatory damages of at least $2.76 million, which is essentially the frozen amount itself. But Conduit wants more than just its money back.
It’s also pushing for punitive damages. And there’s a specific demand that probably won’t get much attention but is actually pretty interesting: Conduit wants an accounting of any interest, income, or profits Tether may have earned from holding those funds during the past year. Frozen USDT sitting on Tether’s end for twelve-plus months — Conduit’s argument is that any gains generated from those assets should be disgorged and returned. That’s the restitution angle.
On top of all that, Conduit is seeking a declaratory judgment — essentially a court ruling that Tether acted wrongfully — and wants the funds unfrozen immediately.
What This Means for Stablecoin Freeze Powers
Tether has long held the technical ability to freeze USDT wallets, and it’s used that power before, often in coordination with law enforcement. But cases where the targeted party disputes the freeze — and where the cited authority apparently denies making the request — are rarer and messier. Stablecoin freeze authority is probably one of the least-examined corners of crypto’s legal landscape, and lawsuits like this one tend to drag those questions into the open.
Conduit’s case is now sitting in a New York court. Tether hasn’t publicly responded to the filing, at least not in any detail captured in the complaint. The next move is Tether’s.
Conduit is seeking no less than $2.76 million in compensatory damages, plus punitive damages and full restitution of any profits earned on the frozen assets since September 2025.
Frequently Asked Questions
Why is Conduit suing Tether?
Conduit is suing Tether for allegedly freezing $2.76 million in USDT since September 2025 without disclosed criteria or justification, and refusing to return the funds despite repeated requests.
What does Conduit want from the lawsuit?
Conduit wants the $2.76 million unfrozen, compensatory and punitive damages, and an accounting of any interest or profits Tether earned from holding the frozen funds over the past year.
