Cross-border payments firm Conduit Technology, Inc. filed suit against Tether on October 5, 2026, in the US District Court for the Southern District of New York, alleging the stablecoin issuer froze approximately $2.76 million of its USDT without notice or legal authority.

The complaint targets Tether's T3 Financial Crime Unit, a joint operational unit the issuer set up to coordinate with law enforcement on illicit finance. Conduit's filing claims the unit acted without authority and that no compliance issue was ever raised against the company itself.

The suit names four Tether entities: Tether Holdings, Tether International, Tether Operations, and Tether Investments S.A. de C.V. As of October 6, 2026, none of the defendants had filed a response, and Conduit's allegations remain at the pleading stage.

What happened to Conduit's treasury

Conduit began holding the USDT in May 2025 as working capital for cross-border payment operations. The company lost access to the wallet on September 24, 2025, according to the complaint.

The freeze traces to a Brazilian Federal Police investigation, the complaint states. Conduit denies any involvement in that probe and says its digital treasury wallet was not flagged by the inquiry.

The framing positions Conduit as an innocent counterparty: a holder of legitimate tokens that lost access because of someone else's case. That posture matters legally, because it places the issuer's unilateral freeze authority — rather than the underlying criminal matter — at the center of the dispute.

What Conduit wants from the court

The complaint requests three remedies:

• A declaratory judgment that Tether lacks legal authority to freeze the assets.
• An immediate order requiring Tether to unfreeze the wallet.
• Compensatory damages of at least $2.76 million.

Conduit also seeks consequential damages and any profits earned on the reserves backing the frozen tokens during the lockout. The reserves claim is unusual: it reaches beyond the face value of the frozen USDT and into the issuer's treasury operations.

Why this suit fits a wider pattern

The case enters a growing body of litigation targeting Tether's freeze authority. Centralized stablecoins give issuers a power that bank deposits — and even most tokenized assets — do not: the ability to immobilize balances at the protocol level. Tether and other issuers have deployed that power repeatedly, sometimes at law-enforcement request and sometimes on their own initiative.

Conduit's complaint reads as a deliberate test of that authority. Its legal theory reduces to a simple claim: it held the tokens legitimately, it was not the subject of the Brazilian inquiry, and it still lost operating capital.

What to watch from here

Three procedural moves will shape the case:

• Tether's formal response, which will reveal whether the issuer defends on jurisdiction, on the merits, or both.
• Any motion to dismiss, which will test whether the Southern District of New York accepts personal jurisdiction over the foreign Tether entities.
• Court treatment of the reserves damages theory, which will clarify whether issuers face exposure for profits earned on frozen collateral.

Each outcome carries broader implications. A merits ruling would create either precedent limiting issuer freeze power or precedent ratifying it. A jurisdictional dismissal would route the dispute elsewhere and leave the central question unresolved.

The court's first rulings on jurisdiction and on the legality of an issuer-initiated freeze against an unrelated holder will set an early benchmark for counterparty exposure across the dollar-stablecoin market.