Tether is facing fresh scrutiny in the U.S. Senate after Democratic investigators reported that most of the Iran-linked crypto wallets they reviewed mainly used USDT.
The Senate Permanent Subcommittee on Investigations’ Democratic staff examined 846 wallets connected to Iran and regional groups that had been sanctioned or targeted for seizure. According to their September 28 report, 84% of those wallets used USDT exclusively or almost exclusively.
The investigators described USDT as an important part of Iran’s shadow banking network and asked U.S. authorities to examine Tether’s sanctions and anti-money-laundering controls. The findings came from the subcommittee’s Democratic investigators and were not presented as a bipartisan conclusion of the full Senate.
Tether rejected the way the report characterized its compliance record. CEO Paolo Ardoino said USDT is not a safe place for sanctioned individuals or criminal groups and pointed to the company’s cooperation with law enforcement.
Tether said it helped freeze nearly $550 million in USDT connected to Iran during enforcement actions in 2026.
The company highlighted two major cases involving wallets linked to Iran’s central bank. More than $344 million in USDT was frozen across two wallets in April, followed by roughly $131 million across four additional wallets in July.
The Senate investigators reviewed more than five years of blockchain activity involving wallets identified by the U.S. Treasury’s Office of Foreign Assets Control and Israel’s National Bureau for Counter Terror Financing.
Among 757 wallets identified by the Israeli agency, investigators said 87% had more than 80% of their transaction value in USDT. Of 101 OFAC-designated wallets connected to Iran or Iranian organizations, 57% mainly used USDT.
The report also examined wallets linked by investigators to Iranian nationals and financial networks connected to Iranian oil sales, Hezbollah and the Houthis.
Investigators said two sanctioned Iranian nationals, Alireza Derakhshan and Arash Estaki Alivand, received about $603 million in USDT between 2021 and 2025 through addresses that were later sanctioned by OFAC.
The report also looked at wallets that investigators attributed to Iran’s central bank. Those wallets received nearly $50 million in USDT during April and May 2025, according to the report.
Blockchain analytics companies have also reported significant Iran-related stablecoin activity. Elliptic previously identified hundreds of addresses linked by Israeli authorities to the IRGC that received large amounts of USDT, while noting that it could not independently confirm that every transaction was directly connected to the group.
Another issue raised by the Senate investigators was how quickly Tether froze certain wallets after government seizure or sanctions actions.
Tether has the ability to freeze USDT at specific blockchain addresses. Investigators said some wallets continued moving funds after they had been identified by authorities.
One example involved 39 wallets identified by Israel in 2023 as connected to Hezbollah-linked financier Tawfiq Muhammad Sa’id Al-Law. The report said five wallets were initially frozen, while another 34 were frozen later in March 2024. Investigators estimated that more than $34.6 million in USDT moved out of the wallets during that period.
Tether has presented a different picture of its enforcement record. The company said it works with OFAC, the Justice Department, FBI, Secret Service, Homeland Security Investigations and other agencies.
According to Tether, it has supported more than 2,900 investigations around the world, including more than 1,600 involving U.S. law enforcement, and helped freeze more than $4.9 billion across different cases.
U.S. authorities have increased their focus on crypto activity connected to Iran during 2026. FinCEN has warned financial institutions that Iranian networks may use stablecoins because they offer fast settlement, liquidity and relatively stable value.
The Treasury Department has also sanctioned Iranian crypto exchanges and other entities accused of helping Iran avoid financial restrictions.
Blockchain analytics firms have reported similar activity. TRM Labs said more than $6.3 billion moved through Shelbit between May 2024 and March 2026, with most of the activity taking place on the Tron network and involving dollar-linked stablecoins.
Chainalysis has also reported significant crypto flows involving Iranian networks, while noting that illicit activity still represents a small share of overall global cryptocurrency transactions.
Senator Richard Blumenthal, the ranking Democrat on the Senate investigation panel, has asked the Treasury Department and Justice Department to examine Tether’s sanctions and anti-money-laundering practices.
Blumenthal also previously requested information from Tether about wallet freezes, sanctioned exchanges and the company’s U.S. legal obligations.
Tether continues to argue that its cooperation with authorities shows it is actively responding to sanctions-related risks. The company said the April and July actions alone resulted in nearly $550 million in Iran-linked USDT being frozen during 2026.
The Senate inquiry now puts additional attention on how stablecoins are being used in Iran-related financial activity and whether Tether’s controls are responding quickly enough when authorities identify sanctioned wallets.
