Tether says its enforcement actions froze roughly $550 million in Iran-linked USDT during 2026, but Democratic investigators on a Senate subcommittee calculate that more than $34.6 million moved out of sanctioned-linked wallets before the issuer completed blacklisting — a gap now referred to the Treasury and Justice departments for potential investigation.

A preliminary report released Sept. 28 by Democratic minority staff of the Senate Permanent Subcommittee on Investigations analyzed 846 crypto wallets that US or Israeli authorities had sanctioned or targeted for seizure over ties to Iran and regional groups. The staff found that 84% of those wallets transacted exclusively or nearly exclusively in USDT, Tether's dollar-pegged token.

Sen. Richard Blumenthal, the Connecticut Democrat and ranking member of the subcommittee, referred the findings to the Treasury Department and the Justice Department and asked both agencies to examine Tether's anti-money-laundering and sanctions-compliance practices. The referrals do not establish that Tether violated federal law, and neither department has confirmed opening a case.

Tether published its own statement the same day, saying actions involving USDT had frozen approximately $550 million across wallets that US authorities identified as connected to Iran's central bank and Iranian sanctions networks.

The timing dispute

The Senate report's 84% figure describes a curated population, not the whole market. Investigators assembled the sample from wallets designated by the Treasury's Office of Foreign Assets Control and Israel's National Bureau for Counter Terror Financing, covering more than five years of designations through August 2026. The report defined a wallet as transacting "predominantly" in a currency when that asset exceeded 80% of the wallet's aggregate transaction value by dollar terms.

The number does not show what share of all USDT transactions is illicit, nor does it measure crypto's share of Iran's overall sanctions-evasion activity.

USDT tracks the US dollar and moves across blockchain networks without conventional bank transfers. Tether retains issuer-level controls that let it blacklist addresses and render the USDT held there immovable. For Democratic investigators, that power makes the timing of each freeze the central issue.

The report examined 39 wallets that Israel's NBCTF identified in June 2023 as associated with Tawfiq Muhammad Sa'id al-Law, whom the US Treasury later sanctioned for providing financial services to Hezbollah. Five of those addresses had been blacklisted, but the remaining 34 were not frozen until March 2024, according to the report. Senate investigators calculated that more than $34.6 million in USDT left those wallets after the Israeli seizure notice was published and before the remaining addresses were frozen.

Those findings are not a court determination that Tether violated US law, and they concern an earlier period than the enforcement actions Tether highlighted from 2026.

Tether's record

Tether points to actions that preceded public designations. On April 23, the company said it supported US authorities in freezing more than $344 million in USDT across two addresses after receiving information from OFAC and other US law enforcement agencies. The following day, OFAC updated the Central Bank of Iran's existing sanctions entry to add those same two blockchain addresses as digital-currency identifiers. The listing links the central bank to the IRGC-Qods Force and Hizballah.

Tether also said more than $130 million in USDT across four wallets was frozen in July as the Treasury expanded the Central Bank of Iran's listed blockchain addresses. Those two disclosed actions account for at least $474 million of the approximately $550 million total Tether says was frozen during 2026. The company did not publish a wallet-by-wallet breakdown reconciling the disclosed examples with the headline figure.

CEO Paolo Ardoino said Tether acts when authorities provide credible information and argued that public blockchains give investigators visibility into fund movements that cash does not.

The Senate report, however, noted that Tether acknowledged receiving a June 4 request for information and documents from the subcommittee but had not responded as of the report's publication. Tether's Sept. 28 statement did not directly address the 846-wallet analysis or the $34.6 million the investigators say moved before the addresses were frozen.

Parallel forfeiture case

The subcommittee report is not the only US enforcement thread linking crypto to Iranian finance. A separate forfeiture case filed by federal prosecutors seeks approximately $61 million in cryptocurrency allegedly tied to black-market Iranian oil sales. Prosecutors said the wider network moved more than $1.5 billion in proceeds and alleged some funds were intended to benefit Iran's government and military, including the Islamic Revolutionary Guard Corps. The Justice Department said the action targeted crypto allegedly connected to sanctions evasion and money laundering tied to Iranian petroleum sales.

The two records illustrate both sides of issuer-controlled stablecoins. Authorities can immobilize large balances once they identify addresses. But delays before blacklisting leave funds free to move, and USDT's issuer-level freeze capability does not operate automatically — it requires a decision.

For Tether, the operational question Blumenthal has now put to federal agencies is whether the delays the minority staff identified represent isolated enforcement gaps or broader compliance failures. The answer will shape how Treasury and Justice weigh issuer-level controls against the banking-style AML obligations that lawmakers have debated for stablecoin legislation.