Tether is facing fresh US Senate scrutiny after Democratic investigators found heavy Iran-linked USDT use across hundreds of sanctioned wallets tied to Iran and regional groups. The findings have placed Iran-linked USDT activity under renewed examination as US sanctions enforcement expands.
The minority staff of the Senate Permanent Subcommittee on Investigations, which is composed of Democrats, published their initial report on September 28. This report examined 846 wallets that were either sanctioned by US and Israeli authorities or were flagged for confiscation due to ties to Iran and other groups.
The report claimed that 84% of the above wallets were found to have traded only in USDT or mostly in USDT. The stablecoin was noted as being significant in Iran’s underground banking system.
What Did Senate Investigators Find About Iran-Linked USDT?
The report involved analyzing blockchain data records that spanned over five years. The wallets were discovered by the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC), as well as the National Bureau for Counterterrorism Financing in Israel.
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Among the 757 wallets found by the Israeli body, 87 percent transacted more than 80 percent of their values in USDT. Such figures meant that Iran-linked USDT dominated in that section of the database.
According to the report, the study considered 101 OFAC-designated wallets associated with Iran or Iranian groups. As per investigators, 57 percent of them mostly utilized USDT, with Bitcoin being the second cryptocurrency.
Two sanctioned Iranian individuals stood out in the report. The addresses believed to belong to Alireza Derakhshan and Arash Estaki Alivand received more than $603 million of USDT between 2021 and 2025.
Who Disputed the Senate Findings on Iran-Linked USDT?
Tether also disagreed with the description of its compliance history in the report. According to Paolo Ardoino, CEO of Tether, USDT is not a haven for sanctioned entities, terrorists, or criminals.
The firm mentioned enforcement cases regarding Iran-related USDT in 2026. It stated that the actions justified about $550 million in asset freezes tied to Iranian networks.
In April, Tether froze more than $344 million on two wallets after receiving data from the United States. The addresses were later designated as digital currency identifiers tied to the Central Bank of Iran by OFAC.
There was another action taken in July. Tether froze almost $131 million on four more Tron wallets that US authorities linked to Iran’s central bank.
Chainalysis independently investigated the July addresses. It found out that the wallets held around $165 million worth of stablecoins, out of which about $131 million remained at the moment of freezing.
Why Are Investigators Questioning Tether’s Wallet Freezes?
The report also looked into the speed with which Tether blacklisted particular wallets. The company can blacklist USDT at particular addresses and thereby prevent movement of these tokens despite the blockchain being operational.
The investigators mentioned that 39 wallets detected in Israel in June 2023 associated with Hezbollah-affiliated financier Tawfiq Muhammad Sa’id Al-Law were blacklisted. Initially, five were blacklisted, whereas the other 34 were frozen in March 2024.
According to the report, over $34.6 million in USDT moved out of these wallets following the Israeli seizure notice. The company provided a different account of its performance. According to Tether, it had assisted in over 2,900 investigations globally, including 1,600 in US-related law enforcement efforts.
The company also stated that it had assisted in freezing over $4.9 billion in several investigations. The company highlighted its collaboration with OFAC, the Justice Department, FBI, the Secret Service, and Homeland Security Investigations.
When Did US Scrutiny of Iran-Linked Crypto Increase?
Investigations by federal agencies into crypto networks in Iran grew throughout 2026. FinCEN alerted financial companies in May about possible use of stablecoins due to their liquidity, efficiency, and stable dollar value.
The Treasury imposed additional sanctions on digital asset businesses in Iran during 2026. These measures attracted greater interest in Iran-linked USDT transactions conducted via exchanges, peer-to-peer platforms, and other intermediaries.
TRM Labs tracked more than $6.3 billion of transactions via Shelbit from May 2024 to March 2026, with the majority taking place through Tron and stable dollars.
Elliptic noted significant USDT transactions through addresses designated by the Israeli government as related to the IRGC. However, Elliptic noted that these addresses might have been owned by service providers managing customer transactions.
Where Does the Senate Inquiry Go Next?
Sen. Richard Blumenthal delivered the report from the Senate to Treasury Secretary Scott Bessent and Attorney General Todd Blanche on September 28. They were asked by the senator to examine the anti-money laundering and sanctions compliance of Tether.
This came after a previous request made in June regarding the freezing of wallets, sanctioned exchanges, and Tether’s views on its US obligations. According to the report from the Senate, Tether had confirmed the request but had yet to respond prior to the issuance of the September 28 report.
This places the Iran-linked USDT at the core of an enforcement fight. The investigators from the Senate are asking about the timing of wallet freezes as the USDT has blocked billions of dollars worth of assets during 2026.
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