Creditors Ask New York Court to Force Tether to Turn Over $344M in Frozen USDT

A group of U.S. creditors holding terrorism judgments against Iran has asked a New York federal court to force Tether to turn over 344,149,759 USDT that the company froze in two sanctioned wallets on the Tron blockchain, according to The Block’s report on a motion filed Friday.

The filing, in the U.S. District Court for the Southern District of New York, marks a legal escalation beyond the freeze itself. The creditors are trying to use the immobilized stablecoins to collect on long-unpaid court judgments against Iran, testing whether a court can treat frozen tokens as assets effectively under the control of their issuer.

According to The Block’s account of the motion, the plaintiffs are terrorism-judgment creditors owed about $552.3 million in compensatory damages and $1.86 billion in punitive damages. The report identified Charles Gerstein as counsel for the plaintiffs.

The motion, as described by The Block, asks the court to compel Tether to cancel or zero out the blocked USDT and reissue an equivalent amount to a wallet controlled by the plaintiffs or their lawyers. The filing argues that Tether has both the power and the obligation to do so. As quoted by The Block, the motion says: “Tether is required to turn over any property of a judgment debtor that it is capable of turning over, and Tether is concededly and obviously capable of turning over USDT because it has done exactly that in response to many U.S. seizure orders.”

The request follows Tether’s own announcement last month that it had frozen more than $344 million in USD₮ across two addresses. In an April 23 statement, the stablecoin issuer said it acted in coordination with the U.S. Treasury Department’s Office of Foreign Assets Control, or OFAC, and U.S. law enforcement. Tether CEO Paolo Ardoino said at the time that “USD₮ is not a safe haven for illicit activity.”

OFAC moved the next day to formally add two Tron digital-currency addresses to the sanctions listing for Bank Markazi, Iran’s central bank. The Treasury action tied the addresses to Iran-related sanctions and to networks linked to Iran’s Islamic Revolutionary Guard Corps, its Qods Force and Hezbollah.

That sequence matters to the creditors’ argument. Unlike a decentralized cryptocurrency that no company can unilaterally alter, USDT is issued by Tether, which can freeze, blocklist, burn and reissue tokens. The plaintiffs’ position, as summarized by The Block, is that once the wallets were blocked and the tokens frozen, Tether had the technical ability to transfer the value elsewhere by reissuing the stablecoins.

The legal theory is relatively straightforward in plain English. Under the Terrorism Risk Insurance Act, certain blocked assets of terrorist parties can be used to satisfy terrorism-related judgments. The motion also reportedly invokes New York turnover procedures, which let creditors ask a court to order a third party holding a debtor’s property to hand it over.

Tether’s April 23 statement confirmed the freeze and the company’s cooperation with authorities, but it did not address this turnover request. The issue now before the court is narrower than a broad debate over crypto regulation: whether a stablecoin issuer that has already frozen sanctioned tokens can be compelled to extinguish them and reissue the same value to judgment creditors.

That makes the case a concrete test of control. If the court agrees with the creditors’ theory, frozen stablecoins may be treated less like inaccessible crypto sitting in a blocked wallet and more like assets a centralized issuer can be ordered to redirect. For now, though, the filing is a request for that order — not a final ruling or a completed seizure.