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A Senate investigation released Monday found that 84% of 846 cryptocurrency wallets sanctioned over links to Iran and its regional proxies transacted almost exclusively in USDT, prompting Sen. Richard Blumenthal to ask the Treasury Department and Justice Department to investigate whether Tether violated U.S. sanctions and anti-money laundering law.
Tether disputed the characterization, saying it helped freeze roughly $550 million in Iran-linked USDT during 2026, a figure the company disclosed the same day the Senate report went public.
The Senate investigation did not examine ordinary USDT users. Its blockchain analysis focused on 846 wallets that authorities had already identified as being associated with Iran or Iranian proxy organizations.
The investigators found that 84% of those wallets had used USDT almost exclusively.
According to the report, the activity included efforts by Iranian interests to move funds into and out of Iran, support the country’s currency and circumvent restrictions imposed on Iranian banks. The investigation also identified activity connected to the procurement and sale of drones and other military equipment.
The report therefore presents USDT not simply as a cryptocurrency used by Iranian individuals, but as part of a broader financial infrastructure that investigators say connects the Iranian government, sanctioned networks and regional proxy organizations.
The finding is significant because USDT is a dollar-denominated stablecoin designed to maintain a value close to $1. Its liquidity and ability to move across public blockchains can make it useful for entities that have difficulty accessing conventional dollar banking.
For Iran, the Senate investigators argue, that creates an alternative financial channel at a time when U.S. sanctions have restricted the country’s access to the international banking system.
The investigation also says terrorist organizations such as Hamas shifted toward USDT after previously using Bitcoin and other cryptocurrencies.
That does not establish that Tether itself financed those organizations. Rather, the Senate investigation is focused on the company’s ability to prevent sanctioned wallets from using its token and whether its controls were sufficient to deter such activity.
Tether’s response came alongside the Senate report.
The company said that actions involving USDT had resulted in approximately $550 million in assets being frozen during 2026 from wallets that U.S. authorities identified as connected to Iran’s Central Bank and Iranian sanctions networks.
The largest action came in April, when Tether said it helped U.S. authorities freeze more than $344 million in USDT across two addresses after receiving information from the Office of Foreign Assets Control and U.S. law enforcement.
According to Tether, OFAC subsequently added those same addresses to its list of sanctioned digital currency identifiers for the Central Bank of Iran, whose sanctions designation is linked to the IRGC-Qods Force and Hezbollah.
In July, Tether said it froze another $130 million in USDT across four wallets after the Treasury Department expanded its Central Bank of Iran designation to additional TRON addresses.
Together, the company says, those actions account for approximately $550 million in Iran-linked USDT frozen during 2026.
However, the figures publicly identified by Tether do not appear to reconcile to that amount. The more than $344 million frozen in April and roughly $130 million frozen in July total about $474 million. Independent blockchain analysis by BitOK similarly puts the combined amount at approximately $474.3 million, leaving a gap of roughly $76 million from Tether’s $550 million figure. Tether’s statement does not specify whether the difference reflects additional freezes, changes in wallet balances or another calculation method.
Tether also said it has frozen more than 22 million USDT across more than 40 cases referred by Israel’s National Bureau for Counter Terror Financing, involving more than 640 addresses.
The company cited its broader cooperation with law enforcement agencies as evidence that USDT’s public blockchain infrastructure can help authorities trace and freeze illicit funds.
That creates a central dispute with the Senate investigation.
Tether points to its recent freezes as evidence of active enforcement, while Blumenthal’s report questions whether the company’s controls historically allowed sanctioned networks to operate for too long before intervention.
The Senate report’s criticism extends beyond the amount of money currently being frozen.
Investigators argue that, before 2024, Tether did not comprehensively and consistently freeze wallets designated by counterterrorism authorities. The report says that failure created an environment in which Iranian-linked networks could continue using USDT.
Blumenthal is now asking Treasury and Justice to determine whether Tether’s conduct could have violated federal law.
His letter to Treasury specifically asks the department to investigate Tether’s anti-money laundering and sanctions compliance and determine whether the company violated the Bank Secrecy Act, the International Emergency Economic Powers Act or other applicable laws.
That is an important distinction.
The Senate report is not a finding that Tether violated U.S. law. It is a congressional investigation that has referred concerns to executive-branch agencies for further investigation.
The distinction is particularly important because Tether says it has been cooperating with U.S. authorities.
The company’s position is that public blockchains give law enforcement visibility into financial flows that would be difficult to obtain from cash transactions and that Tether can freeze USDT when credible information is provided by authorities.
The dispute therefore centers partly on the question of responsibility: whether a stablecoin issuer should primarily respond to government designations and law-enforcement requests, or whether it should be expected to proactively identify and block illicit networks before authorities formally intervene.
The investigation also raises questions about Tether’s connections to senior figures in the Trump administration.
The report highlights Tether’s relationship with Cantor Fitzgerald, the financial firm previously led by Commerce Secretary Howard Lutnick.
According to Blumenthal’s office, Cantor Fitzgerald owns a 5% stake in Tether and holds a substantial portion of Tether’s U.S.-based assets.
Blumenthal argues that Tether’s connections to the administration warrant additional scrutiny over whether federal regulators have provided sufficient oversight of the company.
The report does not establish that those relationships resulted in improper regulatory treatment.
Instead, Blumenthal is asking federal agencies to examine whether previous investigations into Tether were dropped, settled or otherwise curtailed and whether the company’s political relationships played any role in the regulatory environment surrounding it.
That question is separate from the Senate’s blockchain analysis and should be treated as an allegation or request for investigation rather than an established fact.
The Senate investigation arrives only days after U.S. prosecutors seized approximately $84 million from accounts connected to Capstone, a Montana payments company linked to Tether and Bitfinex.
According to a Justice Department civil forfeiture filing reported by Reuters, Capstone allegedly operated as an unlicensed money transmitter while presenting itself to banks as an information technology company.
Prosecutors said Capstone processed hundreds of millions of dollars through its banking relationships, including payments associated with two cryptocurrency companies.
Tether confirmed that it was a customer of the relevant Dominican bank, EQIBank, but said it had no knowledge of the alleged misconduct by Capstone and that its assets held at the bank were limited. The Justice Department has not accused Tether itself of wrongdoing in the case.
The Financial Times reported that prosecutors said hundreds of millions of dollars passed through Capstone’s Wells Fargo account and that almost two-thirds of certain payments appeared to have been made on behalf of Tether and Bitfinex.
The Capstone allegations and the Senate’s Iran investigation are not the same case, and there is currently no basis to claim that Capstone was part of Iran’s USDT network.
But their timing puts a broader question back in focus: how Tether accesses the traditional financial system, the intermediaries it relies on and the compliance controls surrounding those relationships.
The Capstone case also illustrates the banking difficulties that major crypto companies can face when attempting to maintain access to dollar-based financial infrastructure.
The Senate investigation comes as U.S. authorities intensify efforts to disrupt Iran’s financial networks.
The Treasury Department launched Operation Economic Outcast in August, identifying digital assets as one of the sectors vulnerable to Iranian sanctions evasion. Tether’s September disclosure of approximately $550 million in Iran-linked freezes therefore arrived against an increasingly aggressive U.S. enforcement campaign.
The timing also matters.
Tether published its Iran-freezing figures on the same day the Senate investigation became public.
The company framed the figures as evidence of its cooperation with authorities and its ability to disrupt illicit finance. The Senate investigation, meanwhile, used the prevalence of USDT among Iran-linked wallets to argue that the token has become an important component of Iran’s alternative financial infrastructure.
Whether Tether’s latest enforcement actions represent evidence of stronger compliance or demonstrate how extensively USDT had already penetrated Iran’s financial networks is likely to remain part of the debate.
What happens next depends largely on Treasury and the Justice Department.
Blumenthal has asked both agencies to investigate Tether’s sanctions and anti-money laundering practices. If federal investigators determine that the company violated U.S. law, the consequences could extend beyond Tether itself and affect how regulators approach stablecoin issuers and their responsibilities in monitoring decentralized financial networks.
Primary Documents:
Senate PSI report — “Tethered to Terrorism”
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