David Schwartz, former CTO of Ripple, publicly supported Tether’s freezing of approximately $42.4 million in USDT before a formal court order was issued. The incident once again brings to the forefront an old question: Can stablecoin issuers take control of on-chain assets in response to law enforcement requests prior to receiving a formal court order?
The lawsuit targets pre-freezing.
According to reports, two Thai businessmen sued Tether on August 31 in the U.S. District Court for the Southern District of New York, alleging that the company blacklisted 10 Ethereum addresses containing 42,417,785.62 USDT on October 30, 2025, based on an informal request from U.S. Homeland Security Investigations.
The complaint states that the official seizure order was not issued until February 19, 2026. The related allegations have not yet been adjudicated by a court. Schwartz believes that, with asset ownership still unresolved, Tether had little practical choice but to take control of the relevant assets.
RLUSD also retains management rights.
This statement has drawn attention because Ripple itself operates the stablecoin RLUSD. According to Ripple’s terms, RLUSD may freeze wallet addresses when triggered by legal requirements or internal compliance policies, and under specific circumstances, it may burn tokens from one address and reissue them in another.
This means that, like USDT, RLUSD is a stablecoin backed and managed by its issuer. To meet requirements such as sanctions, fraud investigations, redemptions, and court orders, one prerequisite is that the issuer must have administrative control over the tokens.
XRP is designed differently from stablecoins.
The real distinction lies in XRP itself. XRP is the native asset of the XRP Ledger, not a stablecoin issued by an entity. According to the design of the XRPL, features such as freezing and clawback apply only to on-chain issued assets and do not apply to XRP.
Schwartz has previously stated multiple times that Ripple cannot blacklist a specific XRP holder or reverse a valid XRP transaction after it has been confirmed on the network. This also indicates that RLUSD cannot be considered interchangeable with XRP.
Tether expands its cooperation with law enforcement
As this lawsuit emerges, Tether’s cooperation with U.S. law enforcement is also expanding. In February, Tether stated that it assisted U.S. authorities in seizing nearly $61 million in USDT related to a “pig butchering” investigation; in April, it disclosed further cooperation in freezing an additional $344 million in assets.
Therefore, the significance of this case extends beyond Tether itself. If the court subsequently issues a clear ruling, it may further clarify how far stablecoin issuers can go when law enforcement demands immediate action, but formal legal proceedings have not yet been completed.