Stablecoin issuer Tether has frozen millions of dollars of FTX-held USDT in response to a request from law enforcement.

Data from the Tron blockchain explorer shows that $46.5 million worth of USDT on the Tron blockchain has now been frozen.

According to a report from CoinDesk, Tether froze these funds after a request from law enforcement authorities.

“We are starting to receive requests from LE [law enforcement] to temporarily freeze assets while an investigation occurs,” said a Tether spokesperson to CoinDesk, adding that it cannot specifically comment on the request in question. 

Meanwhile, rumors around Tether’s potential links to Alameda Research prompted traders to bet against the stablecoin. Data compiled by parsec shows on-chain traders, led by Mango Markets exploiter Avi Eisenberg, building large short positions on USDT against USDC. 

“USDT goes from being underweight in 3pool to now 70% of assets, utilization up across lending pools,” wrote parsec in a tweet.

At one point, the USDC Borrow APY on Compound and Aave had reached 38% and 12% respectively.

The resulting shorts caused Tether to briefly lose its peg to the U.S. dollar on Thursday, momentarily slipping to a low of $0.98. 

Tether CTO Paolo Ardoino dismissed these rumors in a tweet, saying, “Wow. Must suck to have a worse understanding of finance than an old lady running a cashier.”

Ardoino also said that Tether had processed $700 million worth of redemptions in the last 24 hours alone.

At press time, USDT had regained parity with the U.S. dollar. The stablecoin had a daily trading volume of $111 billion, exceeding that of Bitcoin and Ethereum.