Tether Faces Senate Probe as Iran-Linked Wallets Put USDT Under Scrutiny

Tether has come under new government scrutiny. Democratic staff on the U.S. Senate Permanent Subcommittee on Investigations have found that USDT was the most prevalent stablecoin in hundreds of addresses identified in sanctions and seizure actions against Iranian and other Middle Eastern targets.

A preliminary study published Sept. 28 showed that 84% of the 846 wallets in the study conducted almost all transactions using a dollar-pegged stablecoin.

The report results were compiled by Democratic minority staff on the subcommittee, not agreed to by both parties on the full committee. Report authors noted that USDT is widely used as a major money transfer tool in Iran’s informal banking sector and recommended that the U.S. government investigate Tether’s enforcement of sanctions and anti-money laundering laws.

The review examined crypto activity over five years. Of 757 wallets reported to Israel’s National Bureau for Counter Terror Financing, law enforcement officials said that 87% of those wallets transferred at least 80% of their transactions in USDT.

Of 101 wallets sanctioned by OFAC and linked to Iran or Iranian entities, 57% primarily used a stablecoin. Bitcoin was the second-most common cryptocurrency in both datasets.

The report raised questions about the speed with which Tether reacted to government actions against specific addresses. The investigators noted 39 wallets identified by Israel in June 2023 with ties to Tawfiq Muhammad Sa’id Al-Law, a financier linked to Hezbollah.

Read More: Iran Is Using Tether to Bypass Sanctions: Crypto’s Biggest Real-World Use Case Just Got Darker

Five individuals were banned at first, and another 34 bans were announced in March 2024. Minority employees estimate that more than $34.6 million in USDT was withdrawn from banned accounts following the announcement of the Israeli ban.

Tether disputed the report’s findings about the company’s legal compliance. Tether CEO Paolo Ardoino described USDT as free of significant illicit activity by sanctioned individuals and entities and terrorist groups. Tether officials said that efforts to work with law enforcement led to the seizure of about $550 million of USDT connected to Iran in 2026.

That amount includes $344 million blocked at two addresses in April based on information provided by OFAC and other U.S. officials and about $130 million blocked at four other addresses in July. U.S. officials have associated these addresses with Iran’s central bank and other sanctioned entities.

The company also stated that it has assisted with over 2,900 investigations worldwide, including over 1,600 involving U.S. authorities. Tether said it helped freeze over $4.9 billion in assets in various investigations. The company mentioned working with U.S. authorities.

Sen. Richard Blumenthal, the top Democrat on the subcommittee, provided the report’s information to Treasury Secretary Scott Bessent and Attorney General Todd Blanche, requesting that their departments investigate Tether’s compliance with AML and sanctions laws to see if Tether violated federal laws. 

Read More: Tether Plans AI Apps for Developing Markets as Global Users Top 650M

Blumenthal’s request is not evidence of Tether’s lawbreaking, nor are any of the findings in the report court decisions against Tether.

The controversy brings renewed scrutiny to stablecoin oversight efforts. Congressional investigators have raised concerns about the timing of wallet blockages involving Iranian actors. Officials with Tether say public blockchain data and other information about the stablecoin issuer can assist law enforcement in blocking suspicious transactions.

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