Tether Blacklist Delay Enables $78 Million in Illicit Transfers

By: Isha Das

A recent report from blockchain compliance firm AMLBot has uncovered significant delays in Tether's blacklisting process for USDT transfers on the Ethereum and Tron networks. This lag allowed more than $78 million in illicit funds to evade freezing actions. Tether, a leading stablecoin issuer, employs a multi-signature contract setup for address blacklisting, which the report suggests opens up a critical window for malicious actors to move their funds undetected.

The report, published on May 15, details how the delay in enforcement allowed a considerable portion of Tether's assets to be rerouted. On Ethereum and Tron, this delay is significant due to Tether's infrastructure that requires multiple confirmations before executing blacklisting orders. The gap, according to AMLBot, effectively turns a robust compliance measure into a temporary free pass for those seeking to move illicit funds without scrutiny.

Since 2017, this "laundering loophole" has enabled large sums of money to evade lawful freezing, raising concerns about Tether's efficacy in preventing financial crimes. The AMLBot team underlines that immediate and more stringent compliance actions are necessary to mitigate these risks. The company insists that addressing these systemic vulnerabilities is crucial to maintaining trust in digital currencies and ensuring the market's integrity.

Tether has yet to fully address the implications of the report but is expected to reevaluate its blacklist enforcement processes to reduce the lag time. The issue underscores the ongoing challenges that major digital asset firms face in balancing security with operational efficiency and reinforces the need for constant evolution in compliance strategies.