Tether Accused in Lawsuit of Improperly Freezing 42.4 Million Stablecoins

Tether is facing a new lawsuit related to its freeze of 42.4 million of its USDT stablecoins.

The lawsuit, filed Monday (Aug. 31) by a pair of Thai businessmen, alleged the company blocked the tokens months before United States authorities were granted a seizure warrant.

USDT is the world’s most widely-used stablecoin, and Tether says it is “stable, fully backed, and freely transferable and that it can be used in blockchain transactions as if it were U.S. currency,” according to the lawsuit, which was filed by Nutthawat Rukthammachalern and Natthawat Kasamvilas in federal court.

“In fact, however, inconsistent with and contrary to these representations, defendants have the technological capability to block owners of USDT on any blockchain anywhere in the world from transferring or accessing their USDT and/or to destroy or to ‘burn’ the USDT at the push of a button,” the lawsuit said.

The plaintiffs alleged that Tether was acting on an informal law enforcement request when it froze the funds in October of last year, although no warrants or other legal processes were issued until February of this year.

The lawsuit asked the court to order Tether to remove the plaintiffs’ addresses from its blacklist and to block the company from destroying the frozen tokens and issue replacements to a government-controlled wallet before a final forfeiture decision.

Tether said the case had no merit, CoinDesk reported Wednesday (Sept. 2).

“The new lawsuit against Tether is a baseless attempt to interfere with Tether’s important work with global law enforcement, including the Department of Justice, to prevent the unlawful use of USDT,” the company said, per the report.

Meanwhile, the conversation about stablecoins is changing in light of a new effort by 21 of the world’s biggest banks. They plan to introduce a U.S. dollar-denominated stablecoin in the first half of next year before potentially branching out to other G7 currencies, with the euro a priority.

Banks are building both tokenized deposits and stablecoins “to assemble a portfolio of programmable money and eventually route transactions toward whichever form has the right combination of liquidity, portability, regulation and reach,” PYMNTS reported Tuesday (Sept. 1).

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