Tether faces court push to hand frozen Iran-linked USDT to victims

Victims holding unpaid U.S. terrorism judgments against Iran have asked a federal court in Manhattan to order Tether to turn over 344,149,759 USDT. 

The funds sit in two blocked Tron wallets tied to Iran’s Islamic Revolutionary Guard Corps.

The motion asks Tether to reduce the blocked balances to zero and issue the same amount of USDT to a wallet named by the plaintiffs’ lawyers. The creditors seek to enforce judgments tied to attacks linked to Iran-backed groups.

Filing cites Tether’s control

The filing argues that Tether has the technical ability to act because it has frozen and reissued USDT in earlier law enforcement cases. It says, “Tether is required to turn over any property of a judgment debtor that it is capable of turning over.”

That argument centers on how USDT works. Unlike Bitcoin or Ether, USDT has issuer-level controls. Tether can block addresses and stop balances from moving when it responds to sanctions or law enforcement orders.

OFAC freeze set the stage

The wallets were frozen after OFAC sanctioned Iran-linked crypto addresses on April 24. Crypto.news reported that Tether froze about $344 million in USDT across two Tron addresses after U.S. authorities linked them to the IRGC and Central Bank of Iran networks.

TRM Labs said the two wallets received about $370 million across nearly 1,000 transactions since March 2021. It added that most funds stayed dormant after late 2023, a pattern it described as reserve storage rather than active use.

Wider Tether freeze activity grows

The court push comes as Tether’s freeze role keeps expanding. Crypto.news reported that the T3 Financial Crime Unit, backed by Tether, Tron and TRM Labs, has frozen more than $450 million in suspected illicit assets since launching in 2024.

Separate market updates said Tether froze more than $514 million in USDT across 370 addresses in a recent 30-day period. BlockSec data cited by crypto.news placed Tether’s 2025 blacklist total at $1.26 billion across Ethereum and Tron.

Moreover, the motion does not mean the plaintiffs have received the funds. A judge must still decide whether Tether can be compelled to transfer the frozen USDT under New York turnover rules and federal terrorism enforcement laws.