Tether is facing a new legal challenge after victims holding unpaid U.S. terrorism judgments against Iran asked a federal court to order the company to hand over more than 344 million USDT frozen in sanctioned crypto wallets.
The motion was filed in federal court in Manhattan and targets two blocked Tron wallets allegedly linked to Iran’s Islamic Revolutionary Guard Corps (IRGC). The plaintiffs are seeking access to 344,149,759 USDT currently frozen under U.S. sanctions restrictions.
According to the filing, the victims want Tether to reduce the frozen wallet balances to zero and reissue the same amount of USDT to a wallet controlled by the plaintiffs’ legal representatives.
The case centers on whether frozen stablecoins can legally be transferred to satisfy unpaid terrorism-related judgments under U.S. law.
The plaintiffs argue that Tether has the technical ability to carry out the transfer because the company already controls the issuance and freezing functions of USDT. The filing points to previous law enforcement actions where Tether froze and reissued tokens after receiving official requests.
Unlike decentralized cryptocurrencies such as Bitcoin or Ethereum, USDT includes issuer-level controls that allow Tether to freeze wallet addresses and block transactions when responding to sanctions, investigations, or court orders.
The wallets involved were frozen after the U.S. Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Iran-linked crypto addresses on April 24. Authorities connected the wallets to networks associated with the IRGC and Iran’s central banking operations.
Blockchain analytics firm TRM Labs reportedly found that the two Tron wallets received around $370 million through nearly 1,000 transactions since March 2021. Most of the funds reportedly remained inactive after late 2023, which analysts described as behavior consistent with reserve-style storage rather than active trading.
The legal dispute also highlights Tether’s growing role in global enforcement actions tied to illicit crypto activity.
Recent industry reports showed that the T3 Financial Crime Unit — supported by Tether, Tron, and TRM Labs — has frozen more than $450 million in suspected illicit crypto assets since launching in 2024.
Additional blockchain data reportedly showed Tether freezing more than $514 million in USDT across hundreds of addresses during a recent 30-day period. Analysts also estimated that Tether’s blacklist activity in 2025 alone exceeded $1.26 billion across Ethereum and Tron networks.
The current filing does not automatically transfer the funds. A federal judge must still determine whether Tether can legally be compelled to reissue the frozen USDT under New York turnover rules and federal terrorism enforcement laws.
The case could become an important legal test for how courts treat issuer-controlled stablecoins in sanctions enforcement and terrorism-related asset recovery cases.
