Conduit Technology says Tether froze its $2.76 million treasury wallet without giving a reason, in a suit that tests how far Tether's freeze power reaches.
Conduit Technology has sued Tether over a frozen treasury wallet holding $2.76 million in USDT. The company says Tether locked the funds without a reason and has kept them for over a year. The complaint was filed on October 5, 2026 in the US District Court for the Southern District of New York. The case number is 1:26-cv-08773. Four Tether entities are named as defendants: Tether Holdings, Tether International, Tether Operations and Tether Investments S.A. de C.V. Conduit's lawyers on the filing are Baker Botts and Karan Singh Dhadialla.
For anyone who holds USDT the way they hold cash, the case puts a plain question in front of a US judge. How far does Tether's power to freeze a wallet actually reach? Tether's own published terms say it may freeze any tokens held by a user. It only has to decide, in its sole discretion, that doing so is prudent. Conduit's answer is that no compliance problem of its own justified this freeze. That argument has not been tested in court.
Conduit describes itself in the filing as a leading cross-border payments platform. It says it created the disputed treasury wallet on May 20, 2025 to hold working capital in USDT. The wallet was separate from customer transaction wallets, and controlled only by its own treasury personnel.
The company says the wallet processed 4,427 transactions with 78 counterparties. Volume in the roughly four months before the freeze was more than $1.1 billion. Conduit says it lost access to the funds on September 24, 2025. The complaint alleges Tether froze the wallet without giving a reason, then refused to restore access.
Conduit argues the wallet worked as the equivalent of its operating bank account. The freeze allegedly hindered its ability to pre-fund and settle client transactions. Conduit says it fired employees and closed offices as a result.
Conduit attributes the freeze to Tether's T3 Financial Crime Unit. The unit acted without authority, Conduit says, and without any compliance issue tied to Conduit itself. According to the complaint, Brazilian Federal Police identified certain wallets linked to an investigation and gave those addresses to the T3 unit. Conduit alleges its wallet was not among them. Conduit also says police confirmed they did not identify its wallet for freezing. It says police do not know what evaluation criteria, if any, led Tether to freeze the funds.
The police did ask Tether to freeze wallets linked to Onix Intermediações Ltda, which had used Conduit's platform. Onix shares common ownership with Bull Intermediação de Negócios Ltda, which was under investigation by the police. Conduit says Onix never interacted with the treasury wallet. The wallet did not exist when Onix was using its platform, Conduit says.
On the timeline Conduit gives, Onix stopped using its platform in April 2025. That was about a month before the treasury wallet was created. The wallet never held Onix funds. Conduit also says a Brazilian criminal court determined it was not among the companies under investigation. Nor was it among those whose assets were ordered frozen, it says.
The tension in the case sits in Tether's Terms of Service. The relevant clause reads:
Tether may suspend or terminate your access to the Site or any of the Services, freeze any Tether Tokens held by you, or terminate your Tether Token Wallet, as required by applicable Law or where Tether, in its sole discretion, determines it is prudent to do so or where you have violated, breached, or acted in a manner inconsistent with any provision of these Terms or Applicable Law.
The same document lists Tether's remedies. Among them: "the right to either freeze your Tether Tokens or seize and recover against any of your Tether Tokens, other Digital Tokens, Fiat or other funds, or your interests therein, that are held by Tether or any Associates."
The terms also require disputes to go to final and binding arbitration, one user at a time. Users waive class or representative proceedings. They are a contract between the user and Tether International, S.A. de C.V. Tether Limited assigned them on January 27, 2025.
Conduit's answer to that clause is that Tether "acted on its own initiative to freeze and seize control of Conduit's funds, based on its own undisclosed criteria." The filing says Conduit owes Tether nothing and has no obligation to the stablecoin issuer. Which side of that sentence the terms support is the fight the court will have to settle.
The company wants a declaratory judgment that Tether lacks the legal authority to freeze its assets. It also wants a court declaration that Tether has no authority to freeze or otherwise interfere with its USDT. It asks for an order unfreezing the wallet.
On damages, Conduit seeks:
Its causes of action include conversion, unjust enrichment, breach of fiduciary duty and computer fraud. It also seeks a declaratory judgment and an accounting of the reserves, plus any interest, profits or income Tether may have made on the funds.
As of October 6, 2026, Tether had not responded to the allegations. The case sits at the initial complaint stage. None of Conduit's claims has been tested in court.
The crypto outlet that reported the filing noted that several of the named defendants are entities outside the US. How the Southern District of New York treats them may shape similar disputes down the line. No docket entry for a Tether response, a motion to dismiss or a hearing date was readable on an accessible court page.
One widely repeated line deserves a note. Headlines framed the suit as Conduit saying Tether has "no legal entitlement" to the funds. That exact wording could not be read on any accessible page. The complaint PDF itself is not publicly readable. OffshoreAlert's document page is paywalled, and shows only the filing's opening summary, party list, page count and date. What is supportable is narrower, and it is the substance of the claim anyway. Conduit says it owes Tether nothing. It says Tether froze the wallet without a reason tied to Conduit, and that the freeze should be lifted. The next thing to watch is Tether's first filing in the case.
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