David Schwartz (데이비드 슈워츠), former chief technology officer of Ripple, publicly said Tether’s pre-emptive asset freeze was administratively and legally justified in litigation over 42,417,785.62 USDT.

According to blockchain media outlet U.Today on Tuesday, the case is drawing attention as a legal dispute over whether a stablecoin issuer can pre-emptively freeze a large amount of digital assets before a formal court order is issued.

The case stems from a civil lawsuit in the U.S. District Court for the Southern District of New York. Thai businessmen say Tether froze 42,417,785.62 USDT held in 10 wallets on Oct. 30 last year without a court order, and are seeking release of the assets and damages.

Tether’s freeze followed an informal request from U.S. Homeland Security Investigations. The investigation at the time involved an international so-called “pig butchering” scam. An official court order approving seizure of the funds was issued only on Feb. 19 this year, about four months after the freeze.

The plaintiffs argue they bought the USDT in question in good faith on the secondary market and did not know it was tied to criminal funds. They are seeking to lift the freeze and demand compensation for opportunity losses, including interest income they estimate Tether would have earned by managing the frozen reserves.

Schwartz, by contrast, supported Tether’s argument. He said that in situations involving conflicting claims of asset ownership, the principle of avoiding “double liability” is important. If it is unclear who the lawful owner is, he said it is reasonable for an issuer to safeguard the assets until a court decision rather than returning them at its discretion.

Schwartz in particular said it would have been difficult for Tether to ignore HSI’s prior warning. If it had not frozen the assets despite the warning, he said the fraud group could have moved around $42 million through mixers and other means, and Tether could also have been exposed to criminal liability related to aiding money laundering.

The case also shows a structural dilemma faced by stablecoin issuers. Freezing assets without a court order can expose them to civil liability from users, while failing to respond quickly to investigative requests can create potential liability related to money laundering or criminal proceeds.

The key issue in the trial is whether a stablecoin issuer can be recognised as having the authority to freeze a large amount of digital assets before a formal court order, based only on its own terms and conditions or internal security and compliance policies.

The Southern District of New York’s decision could affect future standards for freezing assets in the stablecoin industry beyond the scope of Tether’s liability in this case. A central issue is expected to be how much discretion private issuers should be granted between pre-emptive freezes at the request of investigative authorities and ex post court oversight to protect users.