A lawyer is asking a federal judge to order Tether to hand over $344 million in frozen USDT — digital tokens tied to Iran’s Revolutionary Guard — to Americans who hold unpaid terrorism judgments. The request, filed by attorney Charles Gerstein, aims to redirect the blocked stablecoins from state-sanctioned smuggling networks to people who have won civil cases against terror sponsors but never collected a dime.
Who’s behind the petition
Gerstein represents a group of victims who have secured court rulings against Iran and its proxies in terrorism-related lawsuits. Those judgments remain unpaid, in part because the defendants’ assets are often hidden or beyond U.S. reach. The frozen USDT, which Tether locked after the Office of Foreign Assets Control flagged it, is now the target of a novel legal maneuver: a direct order compelling Tether to transfer the coins to the victims rather than let them sit indefinitely in limbo.
“The funds are already within the jurisdiction of the court,” Gerstein argued in his filing. “Tether has control over them. A simple transfer order can give these families the compensation they were promised.”
The mechanics of the freeze
OFAC placed the $344 million in USDT under sanctions after linking it to the Islamic Revolutionary Guard Corps, which the U.S. designates as a terrorist organization. Tether, the company that issues and manages the stablecoin, froze the tokens on its platform, preventing any movement. But the money hasn’t been forfeited to the government or distributed to victims. It just sits, frozen, on Tether’s books.
Gerstein’s proposal would change that. He’s asking the judge to issue a writ of garnishment or similar order requiring Tether to transfer the digital assets directly to the judgment holders. If granted, it would be one of the first times a court has compelled a stablecoin issuer to move sanctioned crypto to private plaintiffs.
Why Tether might fight
Tether has argued in other cases that its role is limited to issuing and redeeming tokens, not policing disputes between third parties. The company has also said that complying with such orders could conflict with OFAC regulations or its own terms of service. In this case, the company hasn’t publicly stated its position on Gerstein’s request. A court hearing has not yet been scheduled.
The outcome could set a precedent. If the judge sides with the victims, other terrorism judgment holders may try the same route. If Tether wins, the frozen funds may remain untouched, caught between U.S. sanctions law and the practical difficulty of moving digital assets that are neither cash nor property in the traditional sense.
What comes next
Gerstein will need to convince a federal judge that the court has the authority to order the transfer — and that the move doesn’t violate Tether’s rights or OFAC’s enforcement powers. The legal question is novel: Can a private plaintiff compel a stablecoin issuer to redirect frozen sanctioned assets? The answer, likely months away, will test how far the courts can stretch old garnishment laws into the new world of digital currencies.
