$78 Million Lost to ‘Laundering Loophole’ in Tether Freezing Method Since 2017
A delay in the execution of freeze requests for Tether's USDT stablecoin has allowed malicious actors to exploit a "laundering loophole," resulting in over $78 million lost on Ethereum and Tron since 2017. AMLBot's report indicates a significant lag between the initiation of freeze requests and their on-chain execution, creating opportunities for illicit transactions. The multi-signature contract setup requires multiple approvals, leading to delays; for instance, a 44-minute delay was noted on Tron. Bad actors withdrew $49.6 million on Tron and $28.5 million on Ethereum during these windows. Security firm PeckShield confirmed the existence of this loophole, emphasizing it as an operational issue rather than a contract flaw. AMLBot suggests that automated tools may be developed to monitor freeze requests, alerting wallet owners before enforcement. Recommendations include bundling freeze requests with signatures to eliminate the delay. Tether has not yet commented on the findings.
