Tether Delay Let $78M in Illicit Funds Slip Through, Report Finds

Regulation Tether USDT

Crypto Journalist

Amin Ayan

Crypto Journalist

Amin Ayan

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Amin Ayan is a crypto journalist with over four years of experience in the industry. He has contributed to leading publications such as Cryptonews, Investing.com, 99Bitcoins, and 24/7 Wall St. He has...

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May 16, 2025

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A delay in Tether’s wallet blacklisting process has enabled over $78 million in illicit funds to be moved before enforcement actions could be executed.

In a report released on May 15, blockchain compliance firm AMLBot said there was a significant gap in the timing between the initiation and completion of Tether’s blacklisting on both Ethereum and Tron blockchains.

While the stablecoin issuer has the capability to freeze funds as part of its compliance protocols, AMLBot found that the technical structure of Tether’s multisignature contract creates a lag, giving malicious actors a window to act before restrictions are applied.

How Tether’s Two-Step Blacklist Process Gives Criminals a Head Start

The blacklisting process involves two distinct multisignature transactions. The first publicly submits a wallet address as a potential blacklist target by calling the “addBlackList” function.

The second, which finalizes the process, confirms the submission and triggers the actual freezing of funds. The problem lies in the time gap between these two steps.

In one documented example, a blacklisting submission on the Tron network occurred at 11:10:12 UTC, but the enforcement transaction didn’t execute until 11:54:51 UTC—a 44-minute delay.

According to AMLBot, this effectively acts as a warning signal to anyone monitoring the blockchain, allowing them to move assets before restrictions are applied.

“This delay between a freeze request and its on-chain execution creates a critical attack window, allowing malicious actors to front-run enforcement and move or launder funds before the freeze takes effect,” the report added.

Between November 28, 2017, and May 12, 2025, AMLBot estimates that $28.5 million was moved during these freeze-delay windows on Ethereum, with an average of $365,000 per transaction.

On the Tron network, an additional $49.6 million was transferred before freezes could be enforced. In total, this amounts to $78.1 million in assets that escaped restriction due to timing lags.

Notably, the report found that 4.88% of the 3,480 wallets blacklisted on Tron had taken advantage of the delay, each moving between two to three transactions totaling an average of nearly $292,000.

AMLBot said it could not definitively determine whether the delay was due to technical limitations or human factors within the multisignature process, citing the lack of insight into Tether’s internal operations.

“Let’s be clear: the $76 million referenced in this report should be put in context of the more than $2.7 billion in USD₮ that Tether has successfully frozen and blocked to date,” a Tether representative said.

“While any delay in enforcement should be examined, the idea that this represents a systemic loophole is both misleading and lacking perspective as Tether collaborates with Law Enforcement to freeze addresses on a daily basis.”

The representative also noted that in a recent case involving North Korean-linked hackers, it froze funds within hours, faster than others in the industry.

The company explained that its multi-signature governance model is designed to prevent unilateral actions and protect system integrity, acknowledging a short delay as a necessary trade-off.

Stablecoin Regulation in the Spotlight

Meanwhilel, there has been an ongoing debate on stablecoin regulation.

Legislative efforts such as the GENIUS Act and the STABLE Act have stalled in Congress due to political tensions tied to former President Donald Trump’s expanding crypto initiatives.

The clash has emerged despite growing bipartisan interest in advancing crypto regulation.

The stablecoin bill, spearheaded by Sen. Bill Hagerty (R-Tenn.), was passed out of the Senate Banking Committee in March with backing from five Democrats.

However, momentum appears to have stalled amid deepening political divisions.

Democratic concerns reportedly intensified during a private caucus meeting last week, where Senate Majority Leader Chuck Schumer urged colleagues not to commit to the bill in its current form.