Lawyer Seeks Tether Freeze for $344M in Terrorism Case

Victims of Iranian-sponsored terrorism have filed a motion in a Manhattan federal court, asking a judge to order Tether to hand over more than $344 million in frozen USDT stablecoins. The filing, submitted on Thursday in the Southern District of New York, is the latest legal move by attorney Charles Gerstein to collect decades-old terrorism judgments using cryptocurrency infrastructure.

The plaintiffs, who hold billions of dollars in unpaid U.S. court judgments related to Iranian-backed attacks, want Tether to transfer stablecoins that were frozen after the Office of Foreign Assets Control (OFAC) designated two Tron wallet addresses as belonging to Iran’s Islamic Revolutionary Guard Corps (IRGC). The request seeks to have Tether freeze the tokens at those addresses and reissue an equivalent amount to a wallet controlled by the victims’ legal team.

Among the judgment creditors are survivors and families of past terrorist attacks, such as the 1997 Hamas suicide bombing in Jerusalem, who have long sought compensation from Iran.

A Unique Legal Argument

Unlike Bitcoin or Ether, USDT includes administrative controls that allow Tether to freeze wallets, blacklist addresses, and even zero out balances and reissue tokens elsewhere. Gerstein’s filing argues that since Tether already immobilized the funds in response to OFAC’s sanctions, the company is fully capable of transferring them to the judgment creditors.

This approach builds on a legal strategy Gerstein has used before, including in a high-profile case involving North Korea-linked funds frozen after the KelpDAO hack on Arbitrum. He has also targeted privacy protocol Railgun DAO, focusing on platforms that can freeze, control, or redirect digital assets as potential sources to fulfill unpaid judgments.

A Cleaner Legal Path

The ownership question here is more straightforward than in the North Korea-linked case, where the legal status of stolen funds was heavily contested. In that dispute, Gerstein argued that Ether frozen after a hack by the Lazarus group constituted North Korean property because the hackers briefly controlled the assets. However, Aave countered that stolen funds never legally belonged to the attackers, creating a messy fight over theft, fraud, and title transfer.

In this case, OFAC has already designated the Tron wallets as belonging to the IRGC. The plaintiffs argue this makes the frozen USDT blocked property of a state sponsor of terrorism, which can be executed under federal law to satisfy their judgments.

A Broader Theory Emerges

Gerstein’s broader theory is becoming clearer: if crypto infrastructure can freeze sanctioned assets, courts may eventually decide that those same systems can be used to transfer them to victims holding enforceable judgments. This could set a precedent for how digital assets are treated in cases involving state sponsors of terrorism, potentially opening new avenues for long-unpaid victims to finally collect what they are owed.

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