Two Thai businessmen have sued Tether in a New York federal court, alleging the stablecoin issuer froze $42.4 million in USDT without a warrant. Former Ripple CTO David Schwartz has publicly defended the freeze, tying it to a Homeland Security Investigations probe into a pig-butchering fraud scheme.
Nutthawat Rukthammachalern and Natthawat Kasamvilas filed suit against Tether in the U.S. District Court for the Southern District of New York, claiming the company blacklisted 10 Ethereum addresses holding $42.4 million in USDT without legal authority. The complaint names four Tether entities.
Freeze predates the court order by months
Tether blacklisted the addresses on Oct. 30, 2025, following an informal request from a Homeland Security Investigations agent, without a warrant or court order. An official court order followed only on Feb. 19, 2026, when a federal magistrate judge in North Carolina issued a seizure warrant directing Tether to burn the frozen tokens and mint replacement USDT to a government-controlled wallet.
The plaintiffs argue the warrant neither retroactively authorized the earlier freeze nor allowed Tether to destroy the original tokens before a final forfeiture judgment. They say they acquired the USDT in secondary-market transactions and never opened Tether accounts, bought tokens directly from the company, or agreed to its terms.
Case traces to a pig-butchering investigation
According to attorney Ariel Givner, the funds appear connected to a Homeland Security Investigations Raleigh probe into a pig-butchering scheme that began after a victim reported romance and investment fraud involving a fake trading platform. One wallet tied to the plaintiffs held about $26.1 million and had already been flagged as a consolidation address.
Five days after the warrant, HSI and the Eastern District of North Carolina announced a $61 million USDT seizure tied to the same laundering pattern, and thanked Tether for carrying out the transfer. According to the complaint, the plaintiffs argued: "Defendants are profiting directly from the freeze itself." They are seeking a lift of the freeze, damages if the tokens are destroyed, and repayment of the reserve interest Tether earned during the period.
Schwartz calls the freeze justified
Former Ripple CTO David Schwartz backed Tether's decision, citing the standard principle of guarding against double liability when ownership of an asset is disputed. He said ignoring the HSI warning could have let the fraudsters move the funds through mixers, exposing the stablecoin issuer itself to accusations of money laundering and criminal liability.
The New York court's ruling will decide whether a company's internal terms of service can justify freezing assets before a court order arrives.
Sources: Decrypt, U.Today, CryptoPotato
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