A U.S. Senate panel has intensified scrutiny of Tether after Democratic staff on the Permanent Subcommittee on Investigations published a report examining cryptocurrency flows tied to Iran and regional proxies. The inquiry analyzed 846 wallets that were sanctioned or targeted for seizure and found that 84% transacted exclusively or almost exclusively in USDT, the largest dollar-pegged stablecoin.
Senator Richard Blumenthal said the stablecoin has become a major channel for sanctions evasion and asked the Treasury and Justice departments to investigate Tether’s compliance practices. The report criticized what investigators described as Tether’s connections to the Trump administration that led to lenient oversight of money laundering and illicit activity. It cited two sanctioned Iranian oil traders, Alireza Derakhshan and Arash Estaki Alivand, who moved more than $603 million in USDT between 2021 and 2025 through a network connected to Hezbollah, the Houthis and Iranian financial institutions. Investigators said such activity functions as a digital version of hawala networks and has been linked to the procurement and sale of drones and other military equipment.
The report criticizes Tether’s historical wallet-freezing practices, saying the company did not comprehensively freeze designated wallets before 2024 and that in one case $34.6 million continued moving through sanctioned wallets after designation. It does not conclude that Tether violated federal law. Tether said it froze roughly $550 million across wallets linked to Iran’s central bank in 2026, including more than $344 million in April, and has helped authorities freeze over $4.9 billion globally while working with more than 340 agencies across 67 countries.
