Tether finds itself at the center of an explosive legal battle. A cross-border payments company is accusing the issuer of USDT of having frozen its entire operating capital — with no prior notice, no court order, and no valid explanation.
What makes the case particularly troubling is that neither the Brazilian Federal Police nor the criminal court reportedly made any such request. Tether is alleged to have acted entirely on its own initiative, leaving a company locked out of its funds for over a year.
Behind this case, a fundamental question resurfaces: who actually controls your USDT?
2.76 Million USDT Frozen: What Conduit Technology Is Accusing Tether Of
Conduit Technology, Inc. is an American fintech company specializing in international payments. In May 2025, it held 2.76 million USDT in a Fireblocks wallet dedicated to its treasury operations. That wallet had previously processed 4,427 transactions with a cumulative volume of over $1.1 billion across 78 different counterparties.
Tether froze the entire balance on its own initiative, without any prior notification. When Conduit sought an explanation, the stablecoin issuer simply directed the company to the Brazilian Federal Police. The problem: the Federal Police confirmed they had never requested the freeze. The Brazilian criminal court further clarified that Conduit is not under investigation.
The reason cited by Tether appears to point toward a third party: Onix Intermediações Ltda., a Brazilian company that had used Conduit‘s platform. But according to the complaint, Conduit‘s treasury wallet did not yet exist when Onix was using its services in April 2025, and it never held any funds belonging to Onix. The association between the two entities therefore appears entirely unfounded.
Tether Profits from Frozen Reserves While Conduit Bleeds
The lawsuit raises a particularly sensitive point: while Conduit has been cut off from its operating capital for over a year, Tether continues to collect the interest generated by the reserves backing those USDT. The company makes the accusation bluntly — Tether is “reaping the financial benefits of its unjustifiable seizure of Conduit‘s money.”
This mechanism sits at the heart of Tether’s business model: USDT in circulation is backed by assets (US Treasury bills, cash equivalents) that generate returns. When funds are frozen, Tether retains those returns while the legitimate holder can neither access them nor recover their assets. On a sum of $2.76 million locked up for over twelve months, the financial damage is significant.
Conduit is seeking in court: full restitution of the funds, a judicial declaration confirming that Tether has no legal right to withhold them, and recognition of the issuer’s liability for the harm caused. This case comes at a time when Tether‘s ability to unilaterally freeze wallets — embedded in its terms of service — is facing growing scrutiny across the crypto ecosystem.
A Freeze Power That Puts the Entire Stablecoin Ecosystem in Question
The Conduit case is not an isolated one. Tether holds the contractual power to freeze any USDT wallet, a feature it regularly exercises in cooperation with judicial authorities around the world. The company even presents this capability as a mark of regulatory compliance. But the Conduit case raises a different question: what happens when that power is exercised without any verifiable official request?
For businesses that rely on USDT as operating capital — as is common in cross-border payments — this risk is existential. An unjustified freeze can bring operations to a halt overnight, with no immediate recourse. The decentralization offered by alternative stablecoins (DAI, USDC with its own controversies, or on-chain solutions) keeps coming up in discussions as a response to this type of centralized counterparty risk.
The outcome of this lawsuit could set a significant legal precedent regarding the limits of Tether‘s discretionary power — and more broadly, the accountability of centralized stablecoin issuers toward their business users.
