TL;DR:
- Tether froze 42,417,785.62 USDT across 10 addresses on October 30, 2025, following an informal warning from Homeland Security Investigations (HSI).
- The formal court order authorizing the seizure of these assets was issued by U.S. authorities on February 19, 2026.
- David Schwartz, Chief Technology Officer and XRP Ledger architect, backed the issuer’s actions against the lawsuit filed in the Southern District of New York.
Chief Technology Officer David Schwartz publicly endorsed Tether’s freeze of over 42.4 million USDT this Wednesday, September 2, 2026, amid civil litigation filed in the U.S. District Court for the Southern District of New York (SDNY).
Tether is doing exactly what they're supposed to do when you know you owe money to someone but have a good faith belief you can't be sure who you owe the money to. You hold it safely until a court with jurisdiction over the asset decides.
— David 'JoelKatz' Schwartz (@JoelKatz) September 2, 2026
The legal dispute stems from a lawsuit brought by a group of Thai investors against the stablecoin issuer. The plaintiffs claim legitimate ownership of 42,417,785.62 USDT that has remained frozen since October 30, 2025.
Tether placed the initial restrictions on 10 digital wallets after receiving a communication from Homeland Security Investigations (HSI). According to case court filings, law enforcement linked those funds to an international pig-butchering fraud scheme.
The court order formally legalizing the fund freeze arrived nearly four months later, on February 19, 2026. The plaintiffs claim they purchased the assets in good faith on the secondary market and demand not only the return of their capital, but also financial compensation covering the yield Tether generated on the backing reserves during the forced custody period.
Legal Grounds and Operational Risks in the Stablecoin Sector
David Schwartz entered the public debate to defend the issuer’s procedural stance. The XRP Ledger architect argued that the company acted under the legal doctrine protecting against double liability when conflicting claims exist over the same asset.
The technical protocol of centralized stablecoins like USDT includes blacklisting capabilities within their smart contracts. Schwartz noted that ignoring the initial request from federal law enforcement agencies would have enabled immediate capital flight through privacy mixers.
Failing to act would have placed the issuer under direct scrutiny from federal anti-money laundering laws. As Schwartz explained, a custodian’s baseline fiduciary duty when uncertain about the rightful creditor’s identity is to retain the funds until a court of competent jurisdiction issues a final ruling.
The New York case illustrates the day-to-day complexity digital asset issuers face. Industry firms must balance terms-of-service agreements with preventative federal requests—avoiding criminal penalties without infringing on secondary market users’ property rights.
Tether’s defense maintains that its terms and conditions contractually authorize the preemptive freezing of balances during serious financial crime investigations. According to documents submitted to the SDNY docket, cooperating with government agencies is a standard part of the firm’s compliance policies.
Pending Rulings Before the Federal Court
The New York court will weigh whether the company overreached contractually during the four-month window between the informal request and the formal February 2026 court order. Court filings show the briefing phase will continue over the coming weeks ahead of the judge’s ruling.
