A New York federal court is now the venue for a legal battle testing just how far stablecoin issuers can go when freezing customer funds. Two Thai businessmen have taken Tether to court, alleging the company locked away $42.4 million of their USDT holdings without any court order backing the move in what they described as a case tied to a pig butchering scam. In this type of fraud, scamsters zero down on their victims, eventually gain their trust and then deceive them into investing in fake crypto assets.
According to court documents submitted on Monday, the freeze took place in October 2025. The plaintiffs argue that Tether acted on an informal request from Homeland Security Investigations, a US federal agency, rather than a court-approved warrant. They claim this action bypassed the legal process required to seize private funds.
A formal seizure warrant covering the frozen tokens was not issued until February 2026, months after the funds had already been locked. That warrant came from authorities in the Eastern District of North Carolina and was connected to a separate $61 million investigation into a pig butchering scam. Under the warrant’s terms, the seized tokens were to be burned and reissued directly to a wallet controlled by the government.
Notably, the two plaintiffs have not denied their connection to the underlying investment scam that triggered the investigation. Their legal challenge instead centers on the sequence of events, specifically the several-month gap between when Tether froze their assets and when law enforcement obtained the paperwork to justify that freeze.
The lawsuit is asking the court to order the release of the funds back to the plaintiffs. It also seeks punitive damages, arguing that Tether overstepped its authority by acting before any warrant existed.
