Tether Faces Lawsuit From Conduit Over $2.76 Million in Frozen USDT

Cross-border payments firm Conduit Technology has filed a lawsuit against Tether for $2.76 million (roughly Rs. 267 crore) worth of USDT that had been frozen since September 2025, and the firm says the freezing was not done under any court or governmental authority's order. In an October 5 filing with the US District Court for the Southern District of New York, Conduit claimed that Tether had blocked access to the funds when there were no legitimate grounds for doing so against the company. The defendants in the suit include Tether Holdings, Tether International, Tether Operations, and Tether Investments.  

Conduit Claims Tether's Freeze Reduced Liquidity for International Payments

According to the payments firm, the USDT currency was part of its working capital and did not constitute any customer money. It is seeking access to the funds, along with damages of at least $2.76 million (roughly Rs. 267 crore). The conflict is rooted in an investigation by the Brazilian Federal Police in 2024 into the financial intermediary, Bull Intermediação de Negócios, and its affiliated firm, Onix Intermediações. Previously, Conduit had been offering its payment services to Onix. As stated in its lawsuit, the affiliation with Conduit ceased on April 22, 2025, about a month before the creation of Conduit's treasury wallet on May 20. 

Neither Onix nor Bull owned the wallet, deposited funds into it, or made any transactions using it, according to the firm. In an investigation conducted by the Brazilian police, the addresses of certain cryptocurrencies were provided to Tether's T3 Financial Crime Unit. The Conduit address is not found in that list.

The filing refers to a July 2026 notification by Brazilian authorities which, based on Conduit, showed that T3 used its own analysis to identify other addresses. The Conduit Treasury wallet was part of the freezing procedure as a result of this independent assessment.

Unlike other cryptocurrency systems like Bitcoin, USDT is different since Tether still has technical abilities that will block the movement of any token from the selected addresses. As per the Tether terms of service, the tokens will be frozen whenever there is a legal requirement, whenever the addresses are involved in any investigations, or when the restrictions are necessary in accordance with the policy. 

Conduit's case questions whether the contractual and technical powers granted Tether the legal right to control its assets. Conduit claims that Tether had no right to claim ownership of its USDT and that there was no binding contract between the two that allowed the freeze.

Prior to Tether blocking the wallet, Conduit claims it was using the account to hold capital required for international payments. According to the complaint, the wallet was involved in 4,427 transactions with 78 counterparties and over $1.1 billion (roughly Rs. 10,644 crore) between May and September 2025.

According to Conduit, the inability to use the $2.76 million (roughly Rs. 267 crore) caused a reduction in liquidity that would have been used to finance pre-funding payment channels. However, the claim is based on the inability to conduct more transactions, layoffs, and the closure of offices.