TLDR
- Terror attack survivors have filed a motion in Manhattan federal court seeking to compel Tether to surrender $344 million in frozen USDT
- The stablecoins are connected to Iran’s Islamic Revolutionary Guard Corps (IRGC), designated by U.S. Treasury sanctions
- Legal counsel Charles Gerstein is leveraging cryptocurrency platforms’ freezing capabilities to enforce decades-old terrorism court rulings
- USDT’s centralized nature allows Tether to freeze, blacklist, and reissue tokens — creating a distinct legal pathway compared to decentralized cryptocurrencies
- Similar legal tactics have been deployed by Gerstein in cases involving Arbitrum, the KelpDAO exploit, and Railgun DAO privacy protocol
Survivors and families of Iranian-sponsored terror attacks holding outstanding U.S. court awards have submitted a legal petition requesting a Manhattan federal judge compel Tether to release over $344 million in frozen USDT.
The 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) sanctioning of two Tron blockchain wallet addresses identified as property of Iran’s Islamic Revolutionary Guard Corps.
The petitioners consist of survivors and relatives of those killed in attacks orchestrated by Iranian-backed organizations. The group includes those who survived the 1997 Hamas suicide bombing in Jerusalem. Collectively, they possess billions of dollars in unfulfilled court awards against Iran.
The petitioners are requesting judicial intervention to direct Tether to immobilize the tokens and mint an equivalent quantity — 344,149,759 USDT — to a digital wallet under their attorney’s control.
Charles Gerstein, the attorney spearheading this effort, has been developing a legal framework centered on exploiting cryptocurrency platforms’ administrative controls to secure compensation for terrorism victims.
Why Tether’s Centralized Structure Creates Unique Legal Opportunities
In contrast to Bitcoin or Ether, USDT originates from a centralized entity. Tether possesses the technical capability to immobilize wallet addresses, blacklist user accounts, and under certain circumstances, eliminate balances before reissuing tokens to alternative addresses.
Gerstein’s position is uncomplicated: Tether has already immobilized the assets following OFAC sanctions. Consequently, Tether possesses both the capacity — and, according to the petitioners, the legal duty — to redirect those assets to the judgment holders.
This situation differs from incidents involving stolen digital assets, where ownership legitimacy can face challenges. In this instance, OFAC has already officially identified the wallets as IRGC property, an organization the U.S. government categorizes as a state terrorism sponsor.
The petitioners contend this designation transforms the frozen USDT into “blocked property” of a terrorist entity, rendering it vulnerable to confiscation under federal statutes.
A Broader Legal Campaign Focusing on Cryptocurrency Infrastructure
This marks not Gerstein’s inaugural effort to collect terrorism awards through cryptocurrency channels. He is simultaneously pursuing litigation concerning frozen assets on Arbitrum connected to the KelpDAO security breach, which allegedly involves North Korea’s Lazarus Group.
In that matter, Gerstein contended that Ether frozen following the breach constitutes North Korean assets. That position faces greater legal complexity, as the platform Aave disputed whether stolen assets ever legitimately became the hackers’ legal property.
The Tether matter, Gerstein maintains, presents a clearer legal pathway. The ownership dispute has essentially been resolved through OFAC’s own formal designation.
He is simultaneously advancing a distinct case against privacy protocol Railgun DAO employing comparable legal reasoning.
The underlying legal principle being tested is whether cryptocurrency infrastructure capable of freezing sanctioned holdings can also be judicially compelled to redirect those same holdings to victims possessing legally enforceable awards.
As of the filing submission, no judicial decision has been rendered. The matter remains under consideration in the Southern District of New York.
