Tether is facing a lawsuit from cross-border payments company Conduit Technology over about $2.76 million in USDT that has remained frozen since September 2025.
Conduit claims the funds were held in its own corporate treasury wallet and that no court order or government request specifically targeted the address.
The company filed the lawsuit on Oct. 5 in the U.S. District Court for the Southern District of New York. The case names Tether Holdings, Tether International, Tether Operations and Tether Investments as defendants.
Conduit says the frozen USDT was working capital and not money belonging to its customers. It is asking Tether to restore access to the funds and is seeking at least $2.76 million in damages, along with possible punitive damages and other compensation.
The dispute is connected to a Brazilian Federal Police investigation that began in 2024 involving financial companies Bull Intermediação de Negócios and Onix Intermediações.
Conduit had previously provided payment services to Onix, but says that relationship ended on April 22, 2025. The company says it created the treasury wallet involved in the dispute nearly a month later, on May 20.
According to Conduit’s lawsuit, neither Onix nor Bull owned the wallet, deposited funds into it or used it for transactions.
The company says Brazilian authorities later provided Tether’s T3 Financial Crime Unit with a list of cryptocurrency addresses connected to the investigation. Conduit claims its wallet address was not included on that list.
Conduit says Brazilian investigators later told its lawyers that authorities had not selected its wallet for freezing and did not know how Tether had decided to restrict the address.
The company argues that its wallet may have been frozen because Tether identified it through its own investigation and screening process.
Tether reportedly blacklisted the wallet on Sept. 24, 2025. By the end of September 2026, the address still contained around $2.76 million in USDT, according to the lawsuit.
USDT is different from Bitcoin and some other cryptocurrencies because Tether has technical control that allows it to block specific addresses from transferring tokens.
Tether’s terms allow the company to freeze USDT when required by law or government authorities. The terms also give Tether the ability to restrict addresses connected to investigations or when the company believes a freeze is appropriate under its policies.
Conduit is not arguing that Tether lacks the technical ability to freeze USDT. Instead, the lawsuit questions whether Tether had enough legal grounds to freeze its particular wallet.
The court will have to determine whether Tether’s contractual and technical powers were enough to justify the action against Conduit’s funds.
Tether has used its ability to freeze USDT in cooperation with law enforcement on many occasions. The company said in April that it had helped freeze more than $344 million in USDT connected to two TRON addresses targeted by U.S. authorities.
Tether’s T3 Financial Crime Unit has also worked on cases involving suspected hacks, drug trafficking, terrorism financing and North Korea-linked activity.
Conduit says the freeze caused serious problems for its payments business.
Before the wallet was blocked, the company says it used the funds to support international payment routes. According to the lawsuit, the wallet processed 4,427 transactions involving 78 counterparties and more than $1.1 billion between May and September 2025.
Conduit claims losing access to $2.76 million reduced the liquidity available for pre-funding payments. The company also links the freeze to lower transaction capacity, layoffs and office closures, although those claims have not yet been tested by the court.
The company says it continued trying to recover the funds throughout 2026.
Conduit says its lawyers contacted Tether in June and later sent a formal demand on Aug. 19 asking the company to remove the restriction within five business days.
According to the complaint, Tether had previously directed Conduit toward Brazilian authorities but still did not release the funds after those communications.
Conduit is now bringing several claims against Tether, including conversion, unjust enrichment, breach of fiduciary duty and alleged violations of federal computer-fraud law. The company has also requested a jury trial.
In addition to getting access to the frozen USDT, Conduit wants compensation for the losses it says resulted from the freeze.
The lawsuit also raises another issue involving Tether’s reserves. Conduit argues that while it could not use the frozen USDT, Tether continued holding the assets backing those tokens and may have earned income from them.
The company is asking the court to determine whether it is entitled to any of that income.
The case comes after another lawsuit involving Tether’s power to freeze USDT.
In August, two Thai businessmen sued Tether over around $42.4 million in USDT frozen across 10 Ethereum addresses in October 2025. They claimed Tether acted after an informal request from a U.S. Homeland Security Investigations agent before authorities obtained a seizure warrant.
A federal magistrate later issued a warrant in February 2026 covering tokens connected to an alleged $61 million investment-fraud operation. The plaintiffs argue that the later warrant could not legally justify the earlier freeze.
Conduit’s case is different because it involves another investigation and another wallet. Its main argument is that Brazilian authorities never instructed Tether to freeze its treasury address.
Tether had not publicly responded to Conduit’s allegations as of Oct. 7.
The case is still at an early stage. Tether will first have to respond to the complaint, after which the dispute could move into dismissal motions, discovery or other early court proceedings.
