Ripple's David Schwartz Backs Tether in $42M Freeze Dispute

A High-Stakes Freeze

Ripple CTO emeritus David Schwartz (@JoelKatz) has publicly backed Tether after the stablecoin issuer was sued over the pre-warrant freezing of $42.4 million in $USDT. The case, filed in the U.S. District Court for the Southern District of New York, was brought by two Thai businessmen, Nutthawat Rukthammachalern and Natthawat Kasamvilas, who allege Tether unlawfully blocked access to their funds.

The plaintiffs allege that Tether blacklisted 10 Ethereum addresses containing 42,417,785.62 USDT on October 30, 2025, following an informal request from U.S. Homeland Security Investigations (HSI). According to the businessmen, Tether took the action without a warrant, court order, or notice to them. An official court order authorizing the seizure was issued only four months later, on February 19, 2026.

Schwartz argued that Tether's response was appropriate given the contested ownership of the assets. "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," he wrote. "You hold it safely until a court with jurisdiction over the asset decides."

Fraud Links and a Broader Seizure

The funds appear tied to a wider Justice Department investigation involving more than $61 million in USDT that prosecutors said was stolen through so-called pig-butchering scams, in which fake romantic or social relationships are used to extract victims' funds before the proceeds are laundered. On February 19, 2026, a court in the Eastern District of North Carolina issued a warrant directing Tether to burn the frozen USDT and remint the tokens to a government wallet. Five days later, authorities announced a $61 million USDT seizure traced to addresses allegedly linked to laundering proceeds from pig-butchering victims.

The lawsuit does not dispute the government's claim that the funds are connected to scam proceeds. Instead, the plaintiffs have challenged Tether's authority to freeze, burn, and reissue USDT that they say was purchased on the secondary market. They maintain that they acted in good faith and are demanding that the assets be unfrozen, along with compensation for lost profits, including interest income Tether earned from managing the reserves backing those funds.

The outcome of the lawsuit could set a precedent for how far stablecoin issuers may go in acting upon informal government requests before the formal judicial process is completed. The case spotlights the operational dilemma stablecoin issuers face: balancing the threat of civil lawsuits for freezing assets without court approval against potential criminal liabilities from delayed compliance with regulatory warnings. Neither the businessmen's ownership claims nor the government's allegations concerning the disputed USDT have been decided by a court.

Sources:
CoinDesk: Tether Sued Over $42.4 Million USDT Freeze Allegedly Made Months Before U.S. Warrant
CoinTelegraph: Thai Businessmen Sue Tether for Freezing $42M in $61M Pig Butchering Case
U.Today: Ripple's David Schwartz Defends Tether's $42 Million Pig-Butchering Freeze in Landmark Suit