The world's largest stablecoin issuer has frozen $13.4 million in USDT across 22 wallet addresses on the Ethereum and Tron networks, according to blockchain monitoring firm MistTrack.
The action comes as Tether faces mounting legal scrutiny over its methods for blocking funds, with a Texas-based firm now suing the company for allegedly freezing $44.7 million without following proper international legal protocols.
The freeze operation, detected on October 16, targeted addresses holding varying amounts of USDT, with the largest single wallet containing $10.3 million on Ethereum and another significant address on Tron holding $1.4 million.
While Tether has not issued an official statement explaining the specific reasons for this latest freeze, the company routinely cooperates with law enforcement agencies investigating suspected fraud, terrorism financing, and sanctions violations.
The Balancing Act: Speed vs. Due Process
The freeze highlights a critical tension facing centralized stablecoin issuers operating in an ecosystem designed to be decentralized. As DL News reports, the question facing companies like Tether is deceptively simple yet profoundly complex: how quickly should they honor law enforcement requests when crypto transactions settle near-instantaneously?
Move too slowly, and criminals can transfer ill-gotten gains across multiple wallets and jurisdictions, making recovery virtually impossible. Crypto transactions are irreversible, and the pseudonymous nature of blockchain addresses means bad actors can quickly dissipate funds before authorities can intervene.
Move too quickly, however, and legitimate users can find their assets frozen improperly, potentially violating their rights to due process and causing significant financial harm. This dilemma now sits at the center of an unfolding legal battle that could reshape how stablecoin issuers respond to law enforcement requests.
Texas Firm Sues Over $44.7 Million Freeze
On October 14, Riverstone Consultancy Inc., a Houston-based firm, filed a lawsuit in the Southern District of New York accusing Tether of illegally freezing $44.72 million in USDT spread across eight wallets the company controls. The freeze occurred on April 4 at the request of a local Bulgarian police department, according to the complaint.
Riverstone alleges that Tether acted "improperly and unreasonably" by freezing the funds without following procedures required under the Bulgarian International Judicial Assistance Treaty. The treaty specifies that requests for seizing or freezing assets in a foreign country should go through proper channels involving exchanges between Bulgarian central authorities and foreign affairs liaisons.
"Tether did not follow the proper procedures to freeze the assets in the Wallets," the lawsuit states. When Riverstone contacted Tether seeking clarification, the company allegedly directed them to contact Bulgarian police directly. Those authorities subsequently ignored Riverstone's inquiries, leaving the funds in limbo.
The lawsuit includes three causes of action: breach of fiduciary duty, unjust enrichment (Tether continues earning interest on reserves backing the frozen USDT), and conversion - the improper control of another's property. Riverstone is seeking the return of its funds, at least $44.72 million in damages, and interest.
Conflicting Narratives: Legitimate Business or Tainted Funds?
The Riverstone case illustrates the murky waters surrounding crypto asset freezes. While the company portrays itself as a legitimate business harmed by overzealous enforcement, crypto forensic analysts paint a different picture.
Pseudonymous blockchain investigator ZachXBT, known for tracking illicit crypto flows, analyzed the frozen addresses and concluded the funds were "several hops onchain from ponzi investment scams like BETL, Pegasus Ride, LSSC." The analyst noted that "the Riverstone shell company from HK frequently chainhops back & forth from Tron, Polygon, Ethereum via Bridgers."
Another analyst commented on social media: "There's no way you 'accidentally' associate $44.7M with tainted addresses onchain. It's unfortunate we've reached the point where organized crime is bold enough to fight freezes via sketchy lawyers due to antiquated laws."
These competing narratives underscore the challenge facing both Tether and law enforcement: determining when funds are truly illicit versus when addresses have been incorrectly flagged through chain analysis that traces through multiple hops of legitimate transactions.
Tether's Freeze Track Record: $3.2 Billion and Counting
The October freeze is merely the latest in a pattern of blocking suspicious addresses that Tether has maintained throughout 2025. According to the company's September 15 press release, Tether has frozen more than $3.2 billion in USDT linked to criminal activity through collaboration with over 290 law enforcement agencies across 59 countries.
In the past 12 months alone, Tether voluntarily cooperated with law enforcement to block 3,660 wallets, including 2,100 in coordination with U.S. agencies. The company's freeze operations span multiple networks, though the vast majority occur on Tron and Ethereum, which together host the bulk of USDT's $180 billion-plus circulation.
Major freeze operations in 2025 include:
- June 2025: More than $12.3 million frozen on the Tron network
- April 2025: Approximately $28.67 million frozen across 13 addresses
- March 2025: $28 million frozen on Russian crypto exchange Garantex in coordination with the U.S. Secret Service
The Garantex freeze is particularly noteworthy, as blockchain analytics firm Global Ledger subsequently found the sanctioned exchange still held $15 million in active reserves even after Tether's intervention, highlighting the limitations of stablecoin freezes when exchanges maintain diverse asset holdings.
How Tether's Freeze Mechanism Works
Unlike truly decentralized cryptocurrencies like Bitcoin, USDT is issued and controlled by Tether Holdings Limited. While the tokens exist on decentralized blockchains like Ethereum and Tron, Tether maintains the technical ability to freeze specific addresses through its smart contract architecture.
When law enforcement agencies - such as the U.S. Department of Justice, FBI, Office of Foreign Assets Control (OFAC), or international partners—identify wallets linked to crimes, they can request that Tether freeze those addresses to prevent further movement of funds. The company regularly monitors blockchain activity for links to sanctioned entities, darknet markets, and mixing services like Tornado Cash.
As reported by crypto-focused law firms, when Tether freezes USDT in response to U.S. law enforcement requests, the company often "burns" the frozen tokens (removing them from circulation) and reissues equivalent amounts to government-controlled wallets for potential restitution to victims.
This process has proven effective in numerous cases throughout 2025, including the recovery of funds from pig butchering scams, investment fraud schemes, and terrorism financing operations.
The Celsius Settlement: A Separate $300 Million Question
Adding to Tether's legal complexity, the company recently settled for $299.5 million with the bankrupt Celsius Network estate. That case, separate from the freeze controversy, involved allegations that Tether improperly liquidated nearly 40,000 bitcoins in June 2022 without providing Celsius the contractually required 10-hour window to post additional collateral.
Tether CEO Paolo Ardoino confirmed the settlement on October 14, stating the company had resolved "all issues" regarding the bankruptcy proceeding. The Blockchain Recovery Investment Consortium (BRIC), a joint venture between GXD Labs and VanEck that managed the litigation, praised the settlement's timeliness.
The case highlights another dimension of Tether's operations: its role as a crypto lender willing to accept bitcoin as collateral for USDT loans, and the enforcement mechanisms it deploys when borrowers fail to meet margin requirements.
Industry Implications: The Future of Stablecoin Compliance
The tension between rapid response to criminal activity and respect for due process represents one of the crypto industry's most pressing governance challenges. As stablecoins increasingly integrate with traditional finance through mechanisms like spot ETFs and institutional adoption, the standards for freezing assets will likely face greater scrutiny.
Industry observers note that the issue extends beyond Tether. A Bulgarian law firm recently published guidance on how to unfreeze Tether addresses after the company responded to informal requests. The firm stated that Chinese authorities have requested numerous USDT freezes in recent months, while the FBI traditionally requests address bans for suspicious activities.
Bill Hughes, a prominent crypto industry attorney, noted on social media that "how to freeze stablecoins" represents a critical issue as the industry enters an era of stablecoin proliferation. He observed that members of the crypto security community have criticized Circle (issuer of USDC) for failing to stop laundered funds when proper legal process was lacking, while Tether appears more accommodating to informal law enforcement requests - an approach that security and fund recovery professionals generally support.
The competing priorities create a genuine dilemma. On one hand, Tether's proactive cooperation with law enforcement has demonstrably helped recover funds and disrupt criminal networks. The company's T3 Financial Crime Unit, a collaboration with TRON and TRM Labs, has frozen over $100 million in criminal assets since its August 2024 launch.
On the other hand, the Riverstone lawsuit raises legitimate questions about whether informal requests from local police departments - bypassing treaty-mandated diplomatic channels - constitute sufficient legal basis for freezing tens of millions of dollars in assets.
What's Next?
As the Riverstone case proceeds through federal court, it could establish important precedents for how stablecoin issuers should handle freeze requests. Key questions include: What level of documentation should issuers require before freezing funds? How should they balance speed with procedural safeguards? And what recourse should users have when they believe funds were frozen improperly?
Meanwhile, Tether continues its enforcement operations. With USDT's market capitalization exceeding $180 billion and the stablecoin serving as the backbone of crypto trading across dozens of exchanges, the company's freeze capabilities represent one of the most powerful tools available to law enforcement in the fight against crypto-enabled crime.
Whether those tools are being wielded appropriately, with sufficient guardrails to protect legitimate users, remains an open question - one that the Riverstone lawsuit may help answer in the months ahead.
For now, the latest $13.4 million freeze serves as yet another reminder that despite blockchain's promise of decentralization and censorship resistance, the largest stablecoin in the world remains very much under centralized control. Whether that's a feature or a bug depends largely on which side of a freeze order you find yourself.