Former Ripple Chief Technology Officer David Schwartz has publicly supported Tether in a legal dispute over the freezing of $42.4 million. Commenting on a lawsuit filed by Thai entrepreneurs against the stablecoin issuer in the U.S. District Court for the Southern District of New York (SDNY), Schwartz described the company's actions as administratively and legally justified.
The lawsuit stems from the extrajudicial freezing of 10 wallets, which contained 42,417,785.62 USDT. The restrictions were imposed on Oct. 30, 2025, following an informal request from U.S. Homeland Security Investigations (HSI) as part of a case involving an international pig-butchering fraud scheme.
An official court order authorizing the seizure of the funds was issued only four months later, on Feb. 19, 2026.
The plaintiffs maintain that they acted in good faith, claiming that they acquired the tokens on the secondary market. They are demanding that the assets be unfrozen and that they receive compensation for lost profits, including the interest income Tether earned from managing the reserves backing those funds.
Why the cryptography legend believes Tether had no choice
XRP Ledger architect David Schwartz sided with the defendant, citing the classic principle of protection against double liability when there are competing claims to an asset. He emphasized that when the legality of ownership is in doubt, the issuer must keep the funds secure until a competent court issues its ruling.
According to the expert, ignoring HSI's preventive warning would have allowed the fraudsters to immediately move the $42.4 million through mixers, which could have automatically exposed Tether itself to accusations of facilitating money laundering and subsequent criminal prosecution in the United States.
Tether is doing exactly what they're supposed to do when you know you owe money to someone but have a good faith belief you can't be sure who you owe the money to. You hold it safely until a court with jurisdiction over the asset decides.
— David 'JoelKatz' Schwartz (@JoelKatz) September 2, 2026
The SDNY proceedings have exposed the operational deadlock facing stablecoin issuers, which are caught between civil lawsuits from users over freezes imposed without a court order and potential criminal liability for failing to act promptly in response to regulators.
The New York court's final ruling will determine whether an internal security policy set out in a company's Terms of Service gives private companies the right to freeze millions of dollars in assets before official court orders are issued.