recent report by blockchain compliance firm AMLBot has highlighted a critical vulnerability in Tether’s wallet blacklisting process, revealing that delays in freezing illicit wallets have allowed hackers to move over $78 million in USDT before action was taken.
Key Findings:
• Delayed Enforcement: Tether employs a two-step blacklisting process: an initial public “warning” on the blockchain, followed by the actual freezing of the wallet. This delay, sometimes up to 45 minutes, provides a window for malicious actors to relocate funds.
• Significant Losses: Between November 2017 and May 2025, this lag enabled the unauthorized transfer of $28.5 million on Ethereum and $49.6 million on Tron. Notably, 170 out of 3,480 wallets on Tron exploited this delay, each moving an average of $291,970 before being frozen.
• Technical Constraints: The delay stems from Tether’s multisignature contract setup on both Tron and Ethereum, which, while enhancing security, inadvertently slows down the blacklisting process.
Tether’s Response:
Tether has acknowledged the report, stating, “While any delay in enforcement should be examined, the idea that this represents a systemic loophole is both misleading and lacking perspective.” The company emphasized its collaboration with over 255 law enforcement agencies across 55 countries and its efforts to refine the blacklisting process to minimize potential exploitation.
Implications:
This revelation underscores the challenges centralized entities face in the decentralized crypto ecosystem. While Tether’s ability to freeze assets is a tool against illicit activities, the current process’s latency can be exploited. The situation highlights the need for a balance between security measures and rapid response capabilities to safeguard digital assets effectively. 
As the crypto industry continues to evolve, addressing such vulnerabilities will be crucial in maintaining trust and ensuring the integrity of digital financial systems.#usdt