A lawyer who recently tried to seize Arbitrum-linked crypto now has his sights on Tether, seeking more than $344 million in frozen USDT to satisfy decades-old terrorism judgments.
What happened
- On Thursday, plaintiffs representing victims of Iranian-linked terrorism filed in the U.S. District Court for the Southern District of New York asking a judge to compel Tether to turn over 344,149,759 USDT.
- The stablecoins were frozen after the U.S. Treasury’s Office of Foreign Assets Control (OFAC) designated two Tron wallet addresses as tied to Iran’s Islamic Revolutionary Guard Corps (IRGC). The filing asks the court to freeze those tokens and have Tether reissue an equivalent amount to a wallet controlled by plaintiffs’ counsel.
Who’s behind the effort
- The filing was led by attorney Charles Gerstein, who has pursued a similar legal strategy in other high-profile crypto seizure fights — most notably in litigation tied to the KelpDAO hack/Arbitrum matter and in a suit against privacy protocol Railgun DAO.
- The plaintiffs include judgment creditors who hold long-unpaid U.S. court awards against Iran, including survivors and families linked to a 1997 Hamas suicide bombing in Jerusalem.
Why Tether is being targeted
- Unlike bitcoin or ether, which are often considered immutable once issued, USDT is centrally managed by Tether and includes administrative controls. Tether can freeze wallets, blacklist addresses, zero balances, and in some cases reissue tokens elsewhere.
- Gerstein’s filing argues that because Tether already immobilized the funds in response to OFAC’s designation, the company is technically capable of transferring those tokens to satisfy the judgment creditors.
How this differs from prior cases
- In the Arbitrum/North Korea-related dispute, ownership of the exploited funds was contested: Gerstein argued that ether tied to a Lazarus-linked restaked ether (rsETH) exploit became North Korean property during hacker control, while platforms pushed back that stolen funds never legally became property of the attackers. That created a complex fight over theft, title and jurisdiction.
- Here, plaintiffs say the ownership question is simpler: OFAC’s designation already identifies the Tron wallets as IRGC-controlled, which plaintiffs contend makes the frozen USDT “blocked property” of a state sponsor of terrorism and therefore subject to execution under federal law.
Broader legal theory and implications
- Gerstein’s filings press a broader legal theory: if crypto infrastructure operators can freeze sanctioned assets, courts should be able to order those same operators to transfer frozen crypto to victims who hold enforceable judgments.
- A ruling in favor of the plaintiffs could create a precedent that places custodial and administratively-controlled crypto platforms — including stablecoin issuers, centralized exchanges and certain protocol operators — squarely in the crosshairs of creditors seeking to collect on judgments. That raises potential tensions between crypto proponents’ claims of decentralization and the practical control exercised by issuers of centrally administered tokens.
What’s next
- The filing launches another test of how U.S. courts will treat frozen crypto when sanctions designations and long-standing judgments collide. Tether’s response is not included in the filing; the Southern District of New York will now consider the plaintiffs’ request and any opposition Tether may present.
Bottom line: This case deepens a developing legal narrative — when crypto systems can and do freeze assets, they may also be forced by courts to use those capabilities to satisfy non-crypto judgments, with significant consequences for the industry’s regulatory and operational landscape.
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