Democratic staff on the Senate Permanent Subcommittee on Investigations analyzed 846 sanctioned wallets tied to Iran and its proxies.
They found 84% transacted exclusively, or nearly exclusively, in Tether's USDT.
Tether published a statement the same day citing $550 million of Iran-linked freezes this year, without addressing the report.
Of 846 cryptocurrency wallets sanctioned or targeted for seizure over links to Iran and its regional proxies, 84% transacted exclusively or nearly exclusively in Tether's USDT stablecoin, according to a report released by Senator Richard Blumenthal (D-CT).
The report, titled "Tethered to Terrorism," comes from Democratic staff on the Senate Permanent Subcommittee on Investigations, where Blumenthal is ranking member. It draws on blockchain records for wallets designated by the Treasury's Office of Foreign Assets Control and Israel's National Bureau for Counter Terror Financing between June 2021 and August 2026. The headline figure rests unevenly on the two sets, with 87% of the 757 wallets designated by the Israeli bureau transacting predominantly in USDT, against 57% of the 101 designated by OFAC.
Its second finding concerns scale. Two sanctioned Iranian oil smugglers, Alireza Derakhshan and Arash Estaki Alivand, moved more than $603 million in USDT between 2021 and 2025 through a network that reached Hizballah, the Houthis and Iranian financial institutions, the subcommittee found. It says there is evidence the same network was used to buy and sell drones and other military equipment.
Before 2024, the report says, Tether did not “comprehensively and consistently freeze” wallets designated by counter-terrorism agencies, and in one case $34.6 million continued to move through sanctioned wallets after they had been designated. It notes that Tether has described its compliance with OFAC sanctions as "voluntary" and says it follows OFAC "guidelines," a framing the subcommittee contrasts with the obligations on banks. It also says Hamas shifted from Bitcoin and a mix of tokens toward promoting USDT.
Blumenthal has written to Treasury Secretary Scott Bessent and Attorney General Todd Blanche asking both departments to investigate Tether's anti-money laundering and sanctions compliance. He argues the administration's oversight of crypto firms has "undermined our own national security interests," and points to Cantor Fitzgerald, which owns 5% of Tether and holds a large share of its assets, noting that the bank was run until recently by Commerce Secretary Howard Lutnick and is now controlled by his children. The report cites Bloomberg reporting from March that Tether lent those children money to buy out their father's stake when he divested on nomination.
The subcommittee wrote to Tether in June seeking information on its handling of Iranian transactions. The company confirmed receipt but had not replied by publication, the report says.
Speaking to CNBC's Squawk Box Tuesday, Blumenthal argued the stablecoin was "not just a path, it's a superhighway," not only for the Iranian government's sanctions evasion but for money laundering and trafficking more broadly. Enforcement by Treasury and the Justice Department, he said, had been "none, zero."
Tether published a statement the same day as Blumenthal’s report, setting out its cooperation with law enforcement. It said actions involving USDT had frozen roughly $550 million across wallets U.S. authorities linked to Iran's central bank during 2026, including more than $344 million in April and over $130 million in July. Across all cases it puts the total frozen at more than $4.9 billion, working with over 340 agencies in 67 countries.
"Public blockchains provide authorities with a level of visibility into the movement of funds that simply does not exist with cash," said Tether CEO Paolo Ardoino. The statement did not mention the subcommittee or its findings.
