Conduit Sues Stablecoin Issuer Tether Over Frozen $2.8M Treasury Funds

Cross-border payments platform Conduit Technology has initiated legal action against stablecoin issuer Tether, alleging the company wrongfully froze $2.76 million in digital assets. The lawsuit was filed on Monday in the US District Court for the Southern District of New York.

According to court documents, Conduit established a digital treasury wallet containing USDt in May 2025. In September of that year, Tether froze the entire $2.76 million balance. Conduit argues that Tether possesses no legal claim or entitlement to the capital and executed the freeze without providing adequate justification.

The Dispute Over Asset Control

Stablecoins are digital tokens typically pegged to fiat currencies like the US dollar, designed to maintain a stable value while facilitating rapid transactions on blockchain networks. In its complaint, Conduit contends that issuers lack the authority to seize corporate funds merely because a business chooses to store capital in their currency.

"The funds are unequivocally Conduit’s, but Tether has taken them and is denying Conduit access to them," the company stated in the legal filing. Conduit maintained that it repeatedly requested the release of the assets prior to filing the lawsuit, but the funds remained locked.

Brazilian Investigation and Industry Precedent

The legal filing indicates that Tether's decision to freeze the assets stemmed from an ongoing investigation launched by Brazilian federal authorities in 2024. The probe reportedly targeted financial intermediaries Bull Intermediação de Negócios and Onix. Tether allegedly determined independently that Conduit’s treasury wallet shared ties to these entities before implementing the freeze on Sept. 24, 2025.

This litigation follows a similar legal challenge brought against Tether roughly a month prior. In that case, two Thai nationals filed suit after Tether allegedly froze $42.4 million in USDt following an informal request by US Homeland Security Investigations, which was linked to a broader federal fraud case in North Carolina.

Why it matters

Stablecoin issuers often exercise the technical capability to freeze tokens suspected of illicit activity to comply with international law enforcement. However, this centralized power frequently sparks friction with corporate users and legal experts regarding due process, transparency, and property rights. As institutional adoption of digital assets grows, disputes over who controls frozen funds on permissionless blockchains are increasingly landing in traditional courts, highlighting tensions between compliance protocols and commercial operations.

What to watch

Observers will monitor the US District Court for the Southern District of New York for Tether’s formal response to the complaint. Legal analysts will also track whether the litigation prompts clearer regulatory standards regarding the mechanisms stablecoin issuers use to freeze user assets tied to foreign investigations.