Conduit, a crypto payments firm, has filed suit against Tether in New York federal court alleging that $2.76 million in USDT was frozen for over a year without legal justification or explanation. Tether has historically asserted broad contractual rights to freeze wallets flagged by compliance systems, but Conduit argues the freeze lacked any legal basis. The case highlights the unilateral, opaque nature of Tether's asset control mechanisms.
For Armada's crypto repo desk, any use of USDT as a settlement currency, margin asset, or interim collateral vehicle introduces a freeze risk that is entirely outside Armada's or its counterparty's control. The no-rehypothecation policy protects against secondary exposure, but if USDT appears anywhere in the settlement chain, a Tether-initiated freeze could halt a trade or create a failed delivery. Legal counsel should confirm USDT's status in Armada's collateral and settlement eligibility documentation.