Terror Attack Victims Seek Court Order for $344M in Frozen Tether (USDT) Funds

Key Points

• Terror attack survivors have petitioned a federal court in Manhattan to compel Tether to release $344 million in immobilized USDT
• The stablecoins are connected to Iran’s Islamic Revolutionary Guard Corps (IRGC), designated as sanctioned by U.S. Treasury officials
• Legal counsel Charles Gerstein is leveraging cryptocurrency platforms’ freezing capabilities to enforce decades-old terrorism judgments
• USDT’s centralized structure allows Tether to freeze, blacklist, and reallocate tokens — unlike decentralized cryptocurrencies like Bitcoin or Ether
• Gerstein has employed identical tactics in additional proceedings involving Arbitrum, the KelpDAO breach, and Railgun DAO privacy protocol

Individuals holding outstanding U.S. judicial awards connected to Iranian-sponsored terrorism have submitted a court filing requesting a Manhattan federal judge to compel Tether to release over $344 million in immobilized USDT.

The legal petition was lodged Thursday with the Southern District of New York. It focuses on stablecoins that Tether immobilized following the U.S. Treasury’s Office of Foreign Assets Control (OFAC) identification of two Tron blockchain addresses as property of Iran’s Islamic Revolutionary Guard Corps.

The petitioners represent survivors and relatives of those killed in attacks connected to Iranian-supported organizations. The group includes those who survived the 1997 Hamas suicide attack in Jerusalem. These individuals collectively possess billions of dollars in outstanding judicial awards against Iran.

The plaintiffs are requesting judicial intervention to compel Tether to immobilize the digital assets and redistribute an identical sum — 344,149,759 USDT — to a digital wallet managed by their attorneys.

Charles Gerstein, the attorney spearheading the litigation, has been developing a legal framework centered on utilizing cryptocurrency platforms’ integrated control mechanisms to obtain compensation for terrorism victims.

Why Tether’s Centralized Structure Creates Legal Opportunities

Unlike Bitcoin or Ether, USDT is controlled by a centralized entity. Tether possesses the technical capacity to immobilize wallet addresses, blocklist accounts, and under certain circumstances, eliminate balances and redistribute tokens to alternative addresses.

Gerstein’s legal position is direct: Tether has already immobilized the assets following OFAC sanctions. This demonstrates Tether possesses both the capability — and, according to the petitioners, the legal duty — to redirect those assets to the judgment holders.

This situation differs from proceedings involving stolen digital assets, where ownership legitimacy can be contested. In this instance, OFAC has already officially identified the wallets as IRGC property, an organization the U.S. government designates as a state terrorism sponsor.

The petitioners contend this identification renders the immobilized USDT “blocked property” of a terrorist entity, making it vulnerable to confiscation under federal statutes.

Broader Campaign Focused on Cryptocurrency Infrastructure

This represents not Gerstein’s initial effort to collect terrorism awards through cryptocurrency channels. He is simultaneously directing litigation concerning immobilized assets on Arbitrum connected to the KelpDAO security breach, which allegedly involves North Korea’s Lazarus Group.

In that proceeding, Gerstein contended that Ether immobilized following the breach represented North Korean assets. That position faces greater legal complexity, as the Aave platform disputed whether stolen assets ever legitimately became the perpetrators’ property.

The Tether proceeding, Gerstein maintains, presents fewer complications. The ownership matter has essentially been resolved through OFAC’s official designation.

He is simultaneously advancing another proceeding against Railgun DAO privacy protocol employing comparable methodology.

The underlying legal principle suggests that if cryptocurrency infrastructure can immobilize sanctioned holdings, judicial authorities may similarly possess authority to instruct those systems to reallocate the holdings to victims possessing enforceable awards.

As of the submission date, no judicial determination has been rendered. The proceeding remains active in the Southern District of New York.

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