Ripple’s David Schwartz Backs Tether in $42 Million USDT Freeze Lawsuit

Former Ripple Chief Technology Officer David Schwartz has defended Tether’s decision to freeze $42.4 million in USDT without an initial court order, arguing that the stablecoin issuer faced serious anti-money laundering risks if it allowed the funds to move.

The dispute centers on 42,417,785.62 USDT held across 10 wallets. Tether froze the assets on Oct. 30, 2025, following an informal request from U.S. Homeland Security Investigations (HSI) connected to an international “pig-butchering” fraud investigation.

However, an official court order authorizing the seizure was not issued until Feb. 19, 2026, roughly four months after Tether restricted access to the funds.

Thai entrepreneurs challenging the freeze in the U.S. District Court for the Southern District of New York claim they obtained the USDT legitimately through secondary-market transactions. They are seeking to have the tokens unfrozen and are also demanding compensation for alleged lost profits, including interest generated from reserves backing the frozen USDT.

Schwartz, an architect of the XRP Ledger, argued that Tether’s response was reasonable because the ownership of the assets was disputed. In such circumstances, he said, an issuer could face competing claims and potential liability if it releases funds before a court determines who legally owns them.

He also highlighted the anti-money laundering implications. According to Schwartz, ignoring a warning from HSI could have enabled suspected fraudsters to rapidly transfer the $42.4 million through crypto mixers or other channels, potentially exposing Tether to accusations that it facilitated money laundering.

The lawsuit could have broader implications for stablecoin regulation and centralized crypto issuers. Companies such as Tether can freeze tokens through their control over smart contracts, but doing so before receiving a formal seizure order raises questions about the limits of that authority.

The SDNY case may ultimately clarify whether stablecoin issuers can rely on internal security policies and Terms of Service to freeze millions of dollars in digital assets based on law enforcement requests before a court formally authorizes a seizure.