Lawyer behind Arbitrum crypto seizure fight now targets Tether for $344 million

Victims of Iranian-sponsored terrorism are asking a Manhattan federal judge to order Tether to hand over more than $344 million in frozen USDT, marking the latest attempt by attorney Charles Gerstein to collect decades-old terrorism judgments via crypto rails.

The filing, submitted Thursday in the Southern District of New York, seeks to force Tether to transfer stablecoins it froze after OFAC designated two Tron wallet addresses as belonging to Iran’s Islamic Revolutionary Guard Corps.

The plaintiffs, who hold billions of dollars in unpaid U.S. court judgments tied to Iranian-backed terrorism, are asking the court to order Tether to turn over 344,149,759 USDT held at the blocked addresses by freezing the tokens and reissuing an equivalent amount to a wallet controlled by their counsel.

Among the judgment creditors are victims and families pursuing long-unpaid terrorism awards against Iran, including survivors of the 1997 Hamas suicide bombing in Jerusalem.

Unlike bitcoin or ether, which generally cannot be unilaterally altered by a central issuer, USDT includes administrative controls that allow Tether to freeze wallets, blacklist addresses and, in some cases, zero out balances and reissue tokens elsewhere.

Gerstein’s filing argues that because Tether already immobilized the funds in response to OFAC’s sanctions action, the company is fully capable of transferring them to judgment creditors.

This latest filing expands a legal strategy Gerstein has already deployed in the North Korea-linked Arbitrum fight over frozen funds tied to the KelpDAO hack and in separate litigation against privacy protocol Railgun DAO, targeting crypto platforms that can freeze, control, or redirect digital assets as potential sources to fulfill his client's unpaid judgments.

The legal framework is also cleaner than the North Korea-linked Arbitrum case, where ownership of exploit proceeds remains contested.

In that dispute, Gerstein argued that ether frozen after the Lazarus-linked restaked ether (rsETH )— a tokenized version of yield-bearing ether — exploit constituted North Korean property because the hackers briefly controlled the assets. Aave countered that stolen funds never legally became the attackers’ property, creating a messy fight over theft, fraud, and title transfer.

Here, the ownership question is more straightforward. OFAC has already designated the Tron wallets as belonging to the IRGC, which the plaintiffs argue makes the frozen USDT blocked property of a state sponsor of terrorism and therefore subject to execution under federal law.

Gerstein’s broader theory is becoming clearer: if crypto infrastructure can freeze sanctioned assets, courts may eventually decide that those same systems can be used to transfer them to victims holding enforceable judgments.