Victims of Iran linked terrorist attacks are asking a U.S. court to force Tether to transfer more than $344 million in frozen USDT tied to sanctioned wallets connected to Iran’s Islamic Revolutionary Guard Corps.
Key Takeaways
- Victims of Iran linked attacks want Tether to hand over 344 million USDT frozen in OFAC sanctioned wallets.
- Plaintiffs claim Tether has both the technical ability and legal duty to reissue the funds.
- The lawsuit could become a major test for how issuer controlled stablecoins are treated under U.S. law.
- Tether previously cooperated with U.S. authorities in similar seizure and reissuance cases.
What Happened?
A group of terrorism judgment creditors filed a motion in the U.S. District Court for the Southern District of New York, seeking control of approximately 344.14 million USDT frozen by Tether. The wallets were sanctioned by the U.S. Treasury Department’s Office of Foreign Assets Control on April 24 after authorities linked them to Iran’s Islamic Revolutionary Guard Corps, also known as the IRGC.
The plaintiffs argue the frozen assets should be used to satisfy unpaid court judgments tied to Iran linked terrorist attacks and claim Tether has already demonstrated its ability to freeze, burn, and reissue USDT in previous law enforcement actions.
⚖️ LEGAL: A group of US terrorism judgment creditors is asking a federal judge to force Tether to transfer over $344M in frozen $USDT allegedly linked to #Iran’s IRGC.
— Coinpaper (@coinpapercom) May 15, 2026
The filing argues #Tether has both the technical ability and legal obligation to reissue the funds to the… pic.twitter.com/dkbcM32X6H
Plaintiffs Push Court to Order Tether Transfer
According to the court filing, the victims and their families previously won judgments in U.S. courts related to attacks connected to Iran backed groups. Those judgments reportedly total around $552.3 million in compensatory damages and nearly $1.86 billion in punitive damages.
The plaintiffs now want the Manhattan federal court to compel Tether to reduce the balances in the sanctioned wallets to zero and issue the same amount of USDT to a wallet controlled by the plaintiffs’ legal representatives.
The filing stated:
The legal argument focuses heavily on the unique structure of USDT. Unlike decentralized cryptocurrencies such as Bitcoin or Ether, Tether maintains issuer level control over its stablecoin and can freeze or restrict wallet balances when responding to sanctions or law enforcement requests.
OFAC Sanctions Triggered Wallet Freeze
The dispute centers around two Tron blockchain wallets that were frozen by Tether on April 24, the same day OFAC added the addresses to its Specially Designated Nationals list.
Blockchain analytics firm TRM Labs previously reported that the wallets received nearly $370 million through close to 1,000 transactions dating back to March 2021. Most of the funds reportedly remained inactive after late 2023, suggesting the wallets may have served as reserve storage accounts rather than active operational wallets.
The plaintiffs argue that because the wallets were officially tied to sanctioned Iranian entities, the frozen USDT should qualify as Iranian property subject to turnover under U.S. terrorism enforcement laws.
Previous Tether Actions Cited in Filing
The court motion also points to earlier examples where Tether complied with U.S. government seizure requests.
One cited case involved a November 2025 seizure action in Washington, D.C., where the FBI reportedly served Tether with a seizure warrant in March 2025. Tether later transferred the requested USDT amount to U.S. authorities.
Another case referenced in the filing took place in Ohio on April 25, 2025. In that matter, Tether allegedly burned 4.34 million USDT from a targeted wallet and reissued the same amount to a law enforcement controlled address.
The plaintiffs argue these actions prove Tether has complete operational control over frozen USDT and can legally execute the requested transfer if ordered by the court.
Stablecoin Control Faces Legal Test
The case could become an important legal precedent for stablecoin issuers operating under U.S. jurisdiction. The lawsuit raises broader questions about whether frozen blockchain based assets controlled by centralized issuers can be treated similarly to traditional bank held funds in terrorism related enforcement cases.
The filing also claims New York courts have jurisdiction because much of Tether’s reserves are reportedly custodied and managed in New York through Cantor Fitzgerald.
At this stage, the plaintiffs have not received any funds. A judge must still decide whether Tether can legally be forced to transfer the frozen USDT under federal terrorism enforcement statutes and New York turnover law.
CoinLaw’s Takeaway
In my experience, this lawsuit could become one of the most important legal tests for centralized stablecoins. Tether’s ability to freeze and reissue USDT has always separated it from decentralized crypto assets, but this case pushes that power into a completely different legal territory.
I found the plaintiffs’ argument particularly strong because they are using Tether’s own past cooperation with law enforcement as evidence against the company. If courts ultimately decide frozen stablecoins can be redirected to satisfy terrorism related judgments, it may reshape how governments and courts approach issuer controlled digital assets going forward.
