Seizure of Frozen USDT for Forfeiture
Can a federal law enforcement agency in the United States seize frozen USDT for a civil asset forfeiture proceeding? Yes, USDT can be frozen and seized when law enforcement works with with the stablecoin issuer, Tether.
First, the law enforcement in the United States might gather evidence that the USDT is being used for or the proceeds of illicit activity, such as cyber crimes, fraud, money laundering, or drug trafficking. Law enforcement will use blockchain analytics tools to trace the flow of cryptocurrency, including USDT, to identify the wallet addresses associated with the crime and trace the flow of funds through the blockchain to another wallet containing cryptocurrency that can be seized.
Using blockchain tracing, the law enforcement agency must build enough evidence to show a sufficient nexus between the illegal activity and the USDT being targeted. Unfortunately, law enforcement often makes mistakes because of the problems with properly tracing cryptocurrency through the blockchain.
Second, the federal agency might apply for a seizure warrant in connection with a civil forfeiture case. The seizure warrant requires Tether to send the USDT to a wallet controlled by the U.S. government. Unlike decentralized cryptocurrencies like Bitcoin, which are more difficult to seize without a private key, USDT is a centrally controlled stablecoin, making the seizure possible.
Because USDT is centrally controlled, Tether, the company that issues it, has the ability to “freeze” or “blacklist” addresses. Once Tether is served with that warrant, it might “burn” the USDT and send reissued USDT in the same amount to a government-controlled wallet.
Attorney for the Seizure of Frozen USDT for Forfeiture
The attorneys at Sammis Law Firm are experienced in fighting civil asset forfeiture actions involving cryptocurrency. More of these cases are involving actions by Tether to freeze or burn USDT.
Our attorneys understand the the process for the seizure of frozen USDT that combines federal law enforcement’s investigative capabilities with the centralized control and cooperation of the stablecoin issuer, Tether.
Attorney Leslie Sammis has been successful in getting federal agencies to abandon their attempts to seize or forfeiture USDT for a variety of reasons. In some cases, there is no “nexus” between the criminal activity and the USDT being frozen. Federal agency’s sometimes make bad assumptions about clusters, go down the wrong path, or trace the asset too far.
In other cases, we can show our clients are “innocent owners” who purchased the USDT for value without knowing the funds were tainted by any criminal activity.
After our investigation is complete, attorney Leslie Sammis contacts the federal agent and the Assistant United States Attorney assigned to the case to explain any problems with the nexus or why her client is an innocent owner. In several of these cases, we have convinced agents with a federal agency to cause the funds to be released even after a seizure warrant had been obtained.
For TRC-20 USDT on TRON, the action to freeze the assets typically involve Tether blacklisting the address at the USDT contract level (meaning USDT transfers revert even if the wallet is otherwise active). Independent on-chain blacklist event tracking shows an “AddBlacklist event” for the wallet address at a specific date and time.
After the federal agency freezes the funds, and serves the warrant on Tether, but before Tether moves funds to the government wallet, the unfreezing results in a “DestroyBlackFunds event” for that same address. At that point, the client is free to move the funds.
We also understand how to contest the forfeiture of the frozen assets in civil asset forfeiture proceedings.
Call 813-250-0500.
How is the Seized USDT Sent to the Government?
Tether is the central authority over the cryptocurrency known as “USDT.” The USDT cryptocurrency is one of the world’s first “stablecoins,” pegged to the the U.S. Dollar. Tether smart contracts are programs that execute specific instructions. Those instructions might include minting or burning tokens on a blockchain like Ethereum or Tron.
The seizure of USDT itself is a technical process.
- First, Tether might “burn” or permanently destroy the frozen USDT tokens in the blacklisted address. Tether then “reissues” an equivalent amount of new USDT to a government-controlled wallet. By reissuing USDT, the seizure can occur without the government needing to access the original wallet’s private keys.
- Second, the court order may direct Tether to transfer the frozen funds to a government-controlled wallet.
Once the USDT is in a government-controlled wallet, a civil asset forfeiture proceeding is triggered. The seizure might also be connected to a criminal asset forfeiture if an arrest warrant is also issued, although civil asset forfeiture is more common.
For civil asset forfeiture, an Assistant United States Attorney (AUSA) will file a complaint for forfeiture in the appropriate U.S. District Court. The government must prove that the assets were involved in criminal activity and a nexus exists.
During the forfeiture process, the owner of the USDT or the owner of the wallet from which it was found can file a verified claim for court action. Filing the claim triggers a 90 day deadline for the AUSA to file the complaint for forfeiture in the appropriate U.S. District Court.
When the DEA Freezes Your USDT in the Tether Address
What happens when DEA freezes USDT in cooperation with Tether? In those cases, Tether might ask the USDT holder to contact the DEA after providing the DEA email associated with that investigation. You might be provided with the following email address: SCC.Seizure@dea.gov.
When you email DEA at SCC.Seizure@dea.gov or another email provided, DEA has so many of these cases, they often return a form response that provides:
Good Afternoon,
The United States government has frozen your listed Tether address. If you have a legal interest in this account, please provide your contact information as your ID did not come through on your email.
If you are represented by legal counsel, please provide their contact information as well. If you believe your assets were frozen or seized in error, you may provide the DEA with the following information. This information will be used to confirm your identity and evaluate your claim. Providing this information is voluntarily and does not guarantee your funds will be returned:
- Your full name/contact information (address/phone number/email/tether address)
- A selfie-style photograph;
- An image of your passport or other identity documents;
- Information about the transaction(s) at issue, including information about the counterparty;
- Screenshot(s) showing that you have access to the frozen address(es); and
- Any other relevant information about the transaction(s) that you would like to share.
If you would like to receive notice regarding forthcoming forfeiture actions in the United States regarding these funds, please respond to this email with your contact information and/or the contact information for your attorney. That should include your full name and the physical address where notice should be sent. If you’d prefer to receive notice via email, please indicate that in your response and specify the email address to which notice should be sent.
Regards,
Drug Enforcement Administration
Cyber Support Section
Your attorney can reach out to DEA or another federal agency on your behalf, find out what triggered the freeze and provide information showing that you are an innocent owner who purchased the USDT without knowing it was connected to any illegal activity. You can decide how much information to provide. In some cases, our clients are successful even through they only provide enough information to file the claim.
Read more about how Tether seizes USDT for forfeiture proceedings by the U.S. Government.
Example of Administrative Notice of Seizure of USDT
In a recent notice of seizure published on the forfeiture.gov website, the IRS announces its attempt to forfeiture a Tether wallet (USDT) worth less than the $500,000 value threshold. For this kind of forfeiture case, the agency can publish a notice of administrative forfeiture on the forfeiture.gov website.
One such recent notice provided:
LAST DATE TO FILE: 12/02/2025 NEW YORK 13250063-01, No host Tether wallet (USDT) 1, valued at $396,955.27, seized by the IRS – CI on September 9, 2025 from Tether Limited Inc., by the IRS – CI in Newark, NJ.
As you can see, the notice provides little information. You can search the forfeiture.gov website using the account number, the amount seized, or searching all notices with the word “USDT” until you find your case. At Sammis Law Firm, we also save all of the old notices going back at least five (5) years.
Examples of Other Frozen Stablecoins Seized for Forfeiture
The world’s largest stablecoins, like Tether (USDT), are not formally based or regulated in the United States, although they are widely used here. Other stable coins that can be frozen for seizure in forfeiture proceedings in the United States include the following:
- USD Coin USDC Fiat-backed (cash and cash equivalents) Circle, co-founded by Coinbase
- Tether USDT Fiat-backed (reserves including U.S. Treasury bills, cash, etc.) Tether Limited
- Dai DAI Cryptocurrency-backed (decentralized, overcollateralized by various digital assets, including USDC)
- MakerDAO (a Decentralized Autonomous Organization)
- PayPal USD PYUSD Fiat-backed (USD deposits, short-term U.S. Treasuries)
- Paxos Trust Company, on behalf of PayPal
- TrueUSD (TUSD) (fiat-backed stablecoin) focused on transparency and real-time attestations of reserves
- Frax (FRAX) (stablecoin using a fractional-algorithmic model) backed in part by collateral and partially stabilized algorithmically
- First Digital USD (FDUSD) (issued by a Hong Kong-based company) U.S. dollar-pegged, fiat-backed stablecoin
Seizures involve USDT and USDC are the most common assets targeted for forfeiture proceedings.
Lawsuits Against Tether for Money Damages
When Tether unreasonably freezes USDT, a lawsuit might be brought for money damages against Tether, which includes the following companies: Tether Holdings Limited, Tether Operations Limited, Tether Limited, or Tether International Limited.
In response to a request from law enforcement, Tether will freeze USDT through Tether’s smart contract functions which prevents the wallet holder from accessing or transferring the funds. For many account holders, the inability to sell, buy or trade cryptocurrency might lead to severe financial loss. In many of these cases, at the time the USDT was frozen, the source addresses had not been identified or included on Tether’s blacklist.
On the official website for the Tether platform (tether.to), it promises: “whether it is for personal use or business purposes, Tether tokens offer many benefits as the most stable, liquid and trusted stablecoin.”
Yet, Tether might fail to live up to that promise when it unreasonably freezes USDT so it can be seized for forfeiture by law enforcement agencies in the United States. If so, a lawsuit for money damages might be brought against Tether Holdings Limited, incorporated in the British Virgin Islands and the holding company for Tether Limited, Tether Operations Limited, and Tether International Limited.
Tether interfaces with U.S. customers that seeking to trade USDT by utilizing smart contracts on various blockchains to maintain the USDT’s pegging to the value of the U.S. dollar and to facilitate the issuance, transfer, and redemption of USDT.
Tether might use smart contracts to manage USDT through any of the following ways:
- Compliance and Controls – Tether implements features in smart contracts enabling freezing addresses after allegations of theft or regulatory issues, blacklisting addresses to prevent them from sending or receiving USDT.
- Token Transfers – After the USDT is issued, users can send and receive USDT using wallets that support the underlying blockchain. The smart contract maintains a ledger of balances and ensures transfers comply with rules related to maintaining a sufficient balance on a non-blacklisted address.
- Issuance – When a user deposits USD with Tether Limited, an equivalent amount of USDT is minted using a smart contract and sent to the user’s blockchain wallet. Each smart contract implementation is designed to aline with the blockchain’s token standards to handle transfers, balances, and permissions.
- Blockchain Support – Tether operates on multiple blockchains which each implement USDT via smart contracts or token standards on Ethereum (USDT is an ERC-20 token), Tron (USDT is a TRC-20 token), Solana (USDT as a native SPL token). Compatible token contracts might also be maintained on Algorand, Avalanche, EOS, Omni, or Polygon.
- Redemption – When a user redeems USDT for fiat USD, the tokens are sent to Tether and burned via a smart contract allowing the user to receive fiat funds off-chain. Tether initiates minting and burning actions off-chain by Tether Limited but executes them on-chain through smart contracts.
Even a cold wallet maintained offline is subject to the restrictions imposed by Tether through the smart contracts. Tether can take on-blockchain administrative actions, such as freezing the USDT tokens in the Wallets, rendering those USDT tokens non-transferable.
If Tether receives a request from law enforcement, it might freeze the USDT in a cold wallet by taking on-blockchain administrative action through Tether’s smart contract functions. Tether often takes such actions without showing any documentation that it had the legal right or
authority to freeze the USDT in the cold wallet. Instead, Tether might ask the owner to contact the police.
Tether actually benefits by taking such actions since allow it to earn interest from the reserved assets backing the USDT.
Why Does it Take So Long for Tether to Respond to the Seizure Warrant?
The delay is usually a combination of international legal red tape and the technical architecture of the USDT smart contract. While federal seizure warrants usually have a 14-day window for execution, the AUSA might argue that 14 day window only applies to when the warrant must be served on the company, not when the technical process of the “burn and reissue” must be finalized. But that theory defeats the protections that apply to all other types of seizures for forfeitures. The courts have yet to decide that issue.
What causes the delay? Tether is headquartered in the British Virgin Islands (BVI) and operated primarily from Hong Kong. Even though they cooperate heavily with the FBI and DOJ, they are not a U.S. company. A U.S. warrant often has to go through a “Mutual Legal Assistance Treaty” (MLAT) process or be vetted by Tether’s own international legal team to ensure it doesn’t violate the laws of their own jurisdiction. This “handshake” between U.S. law enforcement and a foreign entity is the primary cause of the months-long delay.
The “burn and reissue” is a permanent, irreversible technical action. Unlike a bank transfer that can be reversed if a mistake is made, once Tether executes the DestroyBlackFunds function in their smart contract, those specific tokens are gone forever. Tether’s compliance team performs an exhaustive secondary audit of the government’s tracing before they pull the trigger. They want to ensure they aren’t destroying funds belonging to an innocent third party that might sue them later for conversion or breach of fiduciary duty.
Since 2023, Tether has frozen over $3.5 billion across more than 7,000 addresses. They are currently assisting in over 1,800 investigations across 62 countries. Simply put, their internal “burn and reissue” queue is massive, and they prioritize cases based on the size of the seizure and the persistence of the AUSA.
Tether often keeps funds in a “frozen” state (where they are still in the original wallet but cannot be moved) for an extended period to allow for administrative or judicial challenges. If a claimant files a “Notice of Claim” or a “Rule 41(g) Motion for Return of Property,” Tether will often pause the burn until the court rules on the ownership.
This article was last updated on Wednesday, February 25, 2026.
