Tether is facing renewed scrutiny in the United States after Democratic investigators on the Senate Permanent Subcommittee on Investigations examined cryptocurrency wallets linked to Iran and regional groups. Their preliminary report found that 84% of 846 wallets targeted by sanctions or seizure actions transacted exclusively, or nearly exclusively, in USDT.
The Democratic minority staff released its preliminary findings on Sept. 28 and described USDT as a significant financial channel within Iran’s shadow banking network. Investigators asked federal authorities to examine Tether’s sanctions and anti-money-laundering controls. The conclusions belong to the subcommittee’s Democratic minority staff and do not represent a bipartisan finding by the full Senate.
Tether disputed the report’s portrayal of its compliance practices. CEO Paolo Ardoino said USDT is not a haven for sanctioned actors, terrorist organizations or criminal networks. The company said enforcement actions involving its stablecoin supported approximately $550 million in Iran-linked asset freezes during 2026.
USDT dominated wallets reviewed by investigators
The minority staff analyzed more than five years of blockchain records involving 846 wallets identified by either the U.S. Treasury’s Office of Foreign Assets Control or Israel’s National Bureau for Counter Terror Financing. The dataset covered designations between June 2021 and August 2026.
Among 757 wallets identified by the Israeli agency, investigators reported that 87% conducted more than 80% of their transaction value using USDT. Within 101 OFAC-designated wallets associated with Iran or Iran-linked organizations, 57% predominantly used the stablecoin.
Bitcoin ranked behind USDT in both groups, according to the report.
Investigators also examined addresses associated with two sanctioned Iranian nationals, Alireza Derakhshan and Arash Estaki Alivand. According to the report, addresses later designated by OFAC received $603 million in USDT between 2021 and 2025.
The minority staff linked the broader network to Iranian oil sales and financial flows involving entities associated with Hezbollah and the Houthis. Those conclusions were based on sanctioned-wallet information and blockchain analytics cited by investigators.
Report examines additional Iran-linked wallets
Another section examined two wallets investigators attributed to Iran’s central bank using leaked documents and transaction records. According to the report, those wallets received almost $50 million exclusively in USDT during April and May 2025.
Investigators also associated three wallets with Modex Exchange Company and said those addresses received close to $600 million in USDT over several months.
Separate blockchain research has previously identified substantial stablecoin activity involving addresses linked to Iran. Elliptic reported in 2025 that 187 addresses identified by Israeli authorities as connected to the Islamic Revolutionary Guard Corps had received $1.5 billion in USDT.
Elliptic cautioned, however, that it could not establish whether every transaction was directly connected to the IRGC. Some addresses could have belonged to service providers processing funds for multiple customers. That qualification limits what can be concluded from transaction totals alone.
Senate staff questions timing of wallet freezes
Investigators also examined how quickly Tether blacklisted certain addresses following government actions.
Tether has issuer-level controls allowing it to block USDT at specified addresses. This means tokens held at a blacklisted address can be prevented from moving even though the blockchain on which they exist continues operating.
The minority staff alleged that some wallets continued operating after counterterrorism designations.
One example involved 39 wallets identified by Israeli authorities in June 2023 as connected to Hezbollah-linked financier Tawfiq Muhammad Sa’id Al-Law. According to the report, five wallets were initially blacklisted, while another 34 were frozen in March 2024.
Investigators calculated that more than $34.6 million in USDT left those wallets after the Israeli seizure notice. The finding forms part of the Democratic staff’s criticism of the timing and consistency of Tether’s controls.
Tether highlights cooperation with authorities
Tether presents a different assessment of its enforcement record. The company says it works directly with OFAC, the Justice Department, FBI, Secret Service, Homeland Security Investigations and other authorities.
In its Sept. 28 statement, Tether said its cooperation had supported thousands of investigations globally, including extensive work with U.S. law enforcement, and helped freeze more than $4.9 billion across different cases.
The company highlighted two major 2026 actions involving addresses linked by U.S. authorities to the Central Bank of Iran.
In April, Tether said it froze more than $344 million in USDT across two addresses after receiving information from OFAC and U.S. law enforcement. OFAC formally added those two Tron addresses as digital currency identifiers for the Central Bank of Iran the following day.
A second action followed in July, when more than $130 million was frozen across four additional wallets after Treasury expanded the central bank’s digital currency identifiers.
Chainalysis reviewed July wallet activity
Chainalysis independently analyzed the four addresses involved in the July action.
According to the analytics firm, the wallets had received approximately $165 million in stablecoins, with about $131 million remaining when Tether froze them. Chainalysis calculated that Tether had frozen almost $475 million from OFAC-identified Central Bank of Iran addresses by that point.
Tether places the broader value of Iran-linked USDT freezes supported during 2026 at approximately $550 million. Its public statement cited the April and July actions while describing the total as involving wallets identified by U.S. authorities as connected to Iran’s central bank and Iranian sanctions networks.
The competing accounts therefore focus less on whether freezes occurred than on how Tether’s broader sanctions controls should be assessed. Senate Democratic investigators questioned the company’s response to designated addresses, while Tether emphasized its ability to trace and freeze assets when authorities provide information.
US agencies increase scrutiny of Iran-linked crypto
Federal scrutiny of Iranian digital-asset networks expanded during 2026.
In May, the Financial Crimes Enforcement Network warned financial institutions that Iranian facilitators could use stablecoins because of their liquidity, settlement speed and exchange-rate stability. It advised institutions to monitor transactions involving foreign digital-asset providers, unregistered peer-to-peer exchangers and other intermediaries that could facilitate IRGC-linked financial activity.
Treasury subsequently pursued additional enforcement measures. OFAC sanctioned Iranian exchanges during the year and designated BitBank and related parties on Sept. 17, describing the platform as part of Iran’s digital-asset sanctions-evasion infrastructure.
Private blockchain researchers have also reported large transaction flows associated with sanctioned networks.
TRM Labs traced more than $6.3 billion through Shelbit between May 2024 and March 2026 after OFAC sanctioned the exchange in August. According to TRM, approximately 88% of that activity traveled over Tron and consisted almost entirely of dollar-linked stablecoins.
Researchers trace additional transaction flows
Elliptic later reported tracing approximately $71.8 million originating from funds linked to the Central Bank of Iran into Shelbit through a multi-chain transaction route.
The firm separately identified approximately $1.68 million moving from addresses attributed to the IRGC toward Shelbit and another $2.3 million moving in the opposite direction.
Chainalysis estimated that sanctioned entities globally received 694% more cryptocurrency value in 2025 than during the previous year. Its data attributed more than $3 billion of Iranian cryptocurrency transfers during 2025 to the IRGC and associated networks.
At the same time, Chainalysis stressed that illicit transactions represented less than 1% of attributed global cryptocurrency volume. That distinction provides context for the figures and avoids treating sanctioned or illicit activity as representative of cryptocurrency transactions generally.
Iranian businesses have also increasingly used cryptocurrency for cross-border settlement as access to conventional banking remains constrained by sanctions, according to the source material. Industry data cited there identified USDT as the cryptocurrency most commonly used in that payment activity.
Blumenthal requests federal investigation of Tether
Sen. Richard Blumenthal, the ranking Democrat on the Permanent Subcommittee on Investigations, sent the minority staff’s findings to Treasury Secretary Scott Bessent and Attorney General Todd Blanche on Sept. 28.
Blumenthal asked both departments to examine Tether’s anti-money-laundering and sanctions compliance practices and determine whether any federal laws had been violated. The request is for an investigation and does not establish that Tether violated federal law. Reporting on the inquiry similarly identifies the findings as coming from Democratic staff.
The request follows an earlier inquiry dated June 4. In that communication, Blumenthal sought records from Tether concerning wallet freezes, sanctioned exchanges and the company’s understanding of its legal obligations in the United States.
According to the Senate report described in the source material, Tether acknowledged receiving the June letter but had not provided a response by the publication of the Sept. 28 findings.
Tether emphasizes its enforcement record
Tether’s public response focused instead on its cooperation with government agencies.
The company said the April and July actions brought Iran-linked USDT freezes supported during 2026 to nearly $550 million. It also cited more than 40 cases referred by Israel’s counterterrorism financing bureau involving more than 640 addresses and over 22 million USDT.
Tether argues that public blockchains give authorities visibility into financial movements and that the company can act when credible information is provided by law enforcement. Ardoino said the issuer remains in direct coordination with authorities in the United States and internationally.
The Senate minority staff, meanwhile, is asking federal authorities to examine whether Tether’s sanctions and anti-money-laundering controls have operated adequately, particularly in cases where designated wallets allegedly remained active before being frozen.
Iran-linked crypto assets remain under federal scrutiny
Separate federal proceedings involving alleged Iran-linked cryptocurrency assets are continuing.
On Sept. 14, the U.S. Attorney’s Office for the Southern District of New York filed a civil forfeiture complaint seeking approximately $61 million in cryptocurrency. Prosecutors allege that the assets originated from black-market sales of sanctioned Iranian oil and petroleum products intended to finance the Iranian government and military components, including the IRGC.
The Senate inquiry adds another layer to that broader enforcement environment. Its Democratic investigators argue that USDT played a dominant role across many of the Iran-linked wallets they examined, while Tether points to hundreds of millions of dollars in frozen Iran-linked assets as evidence of its cooperation with authorities.
Those positions frame the current scrutiny. Blumenthal has requested that Treasury and the Justice Department investigate Tether’s practices, but the source material reports no resulting federal determination that the company violated sanctions or anti-money-laundering laws. The investigation request, the minority staff’s preliminary findings and Tether’s response therefore remain distinct parts of an ongoing compliance debate.
