By Jason Nelson
3 min read
Two Thai businessmen sued Tether on Monday, claiming the stablecoin issuer froze roughly $42.4 million worth of USDT without legal authority.
Nutthawat Rukthammachalern and Natthawat Kasamvilas filed the complaint in the U.S. District Court for the Southern District of New York. It names four Tether entities and concerns USDT held across ten Ethereum addresses.
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According to the complaint, Tether blacklisted the addresses last October at the informal request of a Homeland Security Investigations agent, without a warrant or court order. More than three months later, a federal magistrate judge in North Carolina issued a seizure warrant outlining a plan for Tether to burn the restricted tokens, mint replacement USDT, and transfer it to a government-controlled wallet.
"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,” Tether said in a statement shared with Decrypt.
The plaintiffs argue that the warrant neither retroactively authorized the freeze nor permitted Tether to destroy the original tokens before a final forfeiture judgment.
“Tether froze our clients’ funds following an informal government request with no warrant, no court order, no legal process directed to Tether and no notice,” Mark Beckett, counsel for Rukthammachalern and Kasamvila, told Decrypt in a statement.
“A warrant followed nearly four months later but Tether has no contractual relationship with our clients, is not a custodian of our clients’ USDT, and has no legal right or basis to blacklist our clients’ accounts,” Beckett said.
Tether controls administrative functions in USDT’s smart contract that allow the company to blacklist cryptocurrency addresses on various networks, including Ethereum. Blacklisted tokens remain visible on the blockchain but cannot be transferred. Tether can also burn USDT held at those addresses.
In April, Tether said that it works with more than 340 law-enforcement agencies across 65 countries. Tether said that cooperation had helped freeze more than $4.4 billion in assets connected to suspected unlawful activity.
“USDT is not a safe haven for illicit activity,” said Tether CEO Paolo Ardoino in a statement at the time. “When credible links to sanctioned entities or criminal networks are identified, we act immediately and decisively. Recent events have shown what happens when platforms fail to move quickly, enforcement breaks down, users are exposed, and trust erodes.”
Rukthammachalern and Kasamvilas said they acquired the USDT in secondary-market business transactions and never opened Tether accounts, bought tokens directly from the company, or agreed to its terms.
Attorneys for the plaintiffs rejected claims that their clients were involved in illicit activity and disputed social media posts suggesting otherwise.
“To be clear, our clients acquired their USDT through legitimate commercial activity. They vigorously and categorically reject any suggestion that they were in any way involved in any sort of illegal activity and are actively contesting the government’s position in the Eastern District of North Carolina, as the complaint recites,” they told Decrypt.
Editor's note: This story was updated after publication to include comments from Tether and from attorneys for the plaintiffs.
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