Conduit has sued Tether in the U.S. District Court for the Southern District of New York, claiming the stablecoin issuer froze $2.76 million in its treasury wallet on Sept. 24, 2025, and has refused to release the funds for over a year. The complaint alleges conversion, unjust enrichment, breach of fiduciary duty, and computer fraud, demanding the return of the assets. Conduit argues the freeze was unjustified because it stemmed from a Brazilian Federal Police probe into a third party, Onix, which had previously used Conduit’s platform. However, Conduit states its frozen wallet was created in May 2025, nearly a month after Onix’s last transaction, never held Onix funds, and was flagged by Tether’s own T3 Financial Crime Unit rather than law enforcement.
The company contends that the freeze has severely damaged its operations, forcing layoffs and office closures. Before being locked, the wallet processed more than $1.1 billion in volume across roughly four months. Conduit further alleges that Tether continues to earn interest on the U.S. Treasury securities backing the frozen tokens while denying access to the underlying liquidity. This case adds to existing scrutiny of Tether’s unilateral power to freeze USDT, following separate lawsuits over other freezes and political criticism regarding both excessive and insufficient compliance actions.
This litigation highlights the operational risks inherent in centralized stablecoin infrastructure, where issuers retain unilateral authority to freeze assets based on internal compliance determinations rather than judicial orders. By challenging the validity of a freeze linked to a third-party investigation, Conduit underscores the potential for collateral damage when compliance mechanisms lack transparency or precise targeting. The allegation that Tether profits from interest on frozen reserves while restricting user access raises significant questions about the economic incentives embedded in current stablecoin governance models and the fiduciary duties owed to institutional users.
