Tether's Blacklist Mechanism Fails, $78M in Illegal Funds Transferred

Tether's wallet blacklist mechanism has been found to have a significant delay, allowing over $78 million in illegal funds to be successfully transferred before the freeze takes effect. This revelation comes from a report by blockchain compliance company AMLBot, which highlights the vulnerabilities in Tether's multi-signature contract settings on the Ethereum and Tron blockchains.

The report indicates that there is an average 44-minute delay from the time a blacklist submission is made to when the enforcement actually takes place. During this window, approximately $28.5 million in USDT was transferred on the Ethereum chain, with an average transfer amount exceeding $365,000. On the Tron chain, $49.6 million evaded freezing, with about 4.88% of flagged wallets exploiting this loophole for 2-3 transfers, averaging $292,000 per wallet transfer.

This delay in Tether's blacklist mechanism raises serious concerns about the effectiveness of its compliance measures. The ability of illegal funds to be transferred before freezing takes effect undermines the stability and security of the cryptocurrency ecosystem. It also highlights the need for more robust and timely enforcement mechanisms to prevent such vulnerabilities from being exploited.

The incident underscores the importance of continuous monitoring and improvement of blockchain compliance systems. As the use of cryptocurrencies continues to grow, so does the need for stringent measures to ensure that illegal activities are swiftly detected and addressed. Tether, as one of the leading stablecoin issuers, must take immediate action to rectify this delay and enhance its blacklist mechanism to better protect its users and the broader cryptocurrency market.