Tether has come under fire after Democratic investigators from the Senate Permanent Subcommittee on Investigations found that 84% of 846 sanctioned or flagged crypto wallets linked to Iran transacted almost exclusively in USDT.
Democratic Senator Richard Blumenthal, the ranking Democrat on the Permanent Subcommittee on Investigations, has called on the Justice Department and the United States Treasury to investigate Tether’s AML and sanctions compliance.
Tether Under Scrutiny, Democratic Investigators Call For Investigation
Senator Blumenthal and the minority staff of the Senate Permanent Subcommittee on Investigations released a report stating that 84% of 846 sanctioned or targeted for seizure crypto wallets linked to Iran used USDT almost exclusively for transactions. The report, titled “Tethered to Terrorism,” called USDT a “significant financial lifeline” in Iran’s shadow banking network. The report analyzed over five years of blockchain records and reviewed 846 wallets linked to Iran and other regional proxy groups by the US Treasury’s Office of Foreign Assets Control and Israel’s National Bureau for Counter Terror Financing.
The National Bureau for Counter Terror Financing identified 757 such wallets, adding that 87% of the wallets conducted 80% of their transaction value in USDT, while 57% of wallets designated by the Office of Foreign Assets Control used USDT for their transactions. The report also found that Alireza Derakhshan and Arash Estaki Alivand, two sanctioned Iranian nationals, received $603 million in USDT between 2021 and 2025 from addresses later sanctioned by the Office of Foreign Assets Control. Investigators also used leaked documents and transaction records to link two wallets with Iran’s central bank. The two wallets received $50 million in USDT between April 2025 and May 2025, while three wallets linked with the Modex Exchange Company received $575 million in USDT.
Blockchain Firms Corroborate Findings
Several blockchain firms have also identified large stablecoin flows linked to Iran. In 2025, Elliptic reported that 187 wallet addresses flagged by Israeli authorities as having links to the IRGC had received $1.5 billion in USDT. However, it clarified that it could not identify whether every transaction was linked to the IRGC, as some addresses could belong to service providers.
Tether’s Wallet Freezes Under The Scanner
Investigators also focused on how quickly wallets were blacklisted after government action. Tether can block USDT held with specific addresses and prevent the tokens from being moved. Democratic investigators alleged that some wallets were active even after being flagged or sanctioned under counterterrorism designations. They cited an example of 39 wallets designated by Israel as connected to a known Hezbollah financier, Tawfiq Muhammad Sa’id Al-Law. Tether initially blacklisted five wallets, and the remaining 34 were blacklisted in March 2024. However, investigators stated that $34.6 million in USDT were transferred out of the wallets after the seizure notices.
Tether Disputes Findings
Tether issued a statement disputing the report’s findings and criticism of its compliance record, saying that it helped freeze $550 million in assets linked to Iran. CEO Paolo Ardoino said that “USDT is not a safe haven for sanctioned actors, terrorist organizations, or criminal networks.” It also highlighted major actions involving two addresses linked to Iran’s central bank, during which it froze over $344 million in USDT. The company froze an additional $130 million across four Tron wallets linked to the central bank in July.
Tether added that it works directly with OFAC, the Justice Department, FBI, Secret Service, Homeland Security, and other agencies. It said it supported over 2,900 investigations globally, with over 1,600 involving US law enforcement agencies, and froze a total of $4.9 billion across cases. An independent analysis by Chainalysis found that the four wallets received $165 million in stablecoins and had $131 million when they were frozen.
Blumenthal Calls For Tether Investigation
Senator Richard Blumenthal, ranking Democrat on the Permanent Subcommittee on Investigations, sent the report to Treasury Secretary Scott Bessent and Attorney General Todd Blanche. Blumenthal also called for an investigation into Tether’s anti-money laundering (AML) and compliance practices to determine whether it violated any federal laws. The senator previously sought records from Tether in a June 4 inquiry covering wallet freezes and sanctioned exchanges. Tether acknowledged the letter, but has not responded as of now.
Meanwhile, US authorities are continuing their investigation into Iran-linked crypto assets. The US Attorney’s Office for the Southern District of New York filed a civil forfeiture complaint on September 14, seeking $61 million in cryptocurrency. Prosecutors have alleged that the crypto originated from the black market sale of Iranian oil and petroleum products.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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