A new report from blockchain compliance firm AMLBot reveals that a delay in Tether’s wallet blacklisting process facilitated the transfer of over $78 million in illicit USDT, raising eyebrows across the crypto community. The report, released today, highlights the temporal gap between the initiation and execution of blacklisting procedures on both the Ethereum and Tron networks—a window opportunistic enough for bad actors to exploit.
The Technical Tangle
Tether’s blacklisting protocol involves a multi-step, multisignature process that, ideally, should serve as a robust compliance mechanism. However, AMLBot’s findings suggest that this very structure introduces a lag—evident in a case where a 44-minute delay was observed between the initial warning and the actual blacklisting of a Tron address. This delay, occurring on November 28, 2017, through May 12, 2025, has reportedly allowed blockchain-savvy individuals to escape enforcement by quickly moving or laundering funds.
AMLBot’s report sternly labels the delay as a “critical attack window,” providing a tantalizing opportunity for fraudsters to preemptively shift their assets. The analysis found that 170 out of 3,480 wallets on the Tron blockchain exploited this lag, with each withdrawing an average of $291,970 during the freeze delay.
Tether’s Defense
Tether, for its part, has pushed back against claims of a systemic vulnerability. In a statement to Cointelegraph, a Tether spokesperson argued that the delay is an inherent aspect of its “multisignature governance model,” designed to prevent unauthorized freezes and maintain the integrity of the ecosystem. “The idea that this represents a systemic loophole is both misleading and lacking perspective,” the representative insisted, emphasizing ongoing collaborations with over 255 law enforcement agencies worldwide. This comes as Tether is also expanding its reach, as explored in Tether Finalizes Buying 70% of Adecoagro Stake, Securing Tokenization Ambition, highlighting its broader strategic ambitions.
According to Tether, while the delay is acknowledged, it reflects a “trade-off for responsible responsiveness” within its $100+ billion ecosystem. Efforts are apparently underway to refine the process and close any gaps that could advantage illicit actors. “If you think you can use Tether to move illicit funds, think again,” the spokesperson warned.
The Bigger Picture
Despite these assurances, the AMLBot report injects a dose of skepticism into the conversation about Tether’s enforcement capabilities. While Tether has successfully frozen and blocked over $2.7 billion in USDT to date, the $78 million that slipped through the cracks cannot be overlooked. The report suggests that the delay is not merely theoretical; it is a tangible issue that needs addressing.
In 2024, Tether, Tron, and TRM Labs had previously made headlines by freezing over $126 million in USDT linked to illicit activities. Yet, the latest findings beg the question: Is the current system robust enough to cope with the evolving tactics of blockchain-savvy fraudsters? As Tether looks to launch its U.S.-focused stablecoin later this year, as reported in Tether’s U.S.-Focused Stablecoin Could Launch Later This Year, CEO Paolo Ardoino Says, the scrutiny over its compliance mechanisms will likely intensify.
Looking Ahead
As Tether continues to refine its processes, the industry will be watching closely. The stakes in maintaining the integrity of digital currencies are high, and any perceived weaknesses could have far-reaching implications. The question remains whether these improvements will be sufficient to prevent bad actors from exploiting the system in the future.
In the ever-evolving world of cryptocurrency, where compliance and security are paramount, this report serves as a reminder of the challenges that persist. As Tether fine-tunes its processes, the broader cryptocurrency market will undoubtedly continue to scrutinize its moves—hoping for a system that is both effective and resilient.
Source
This article is based on: Tether blacklist delay allowed $78M in illicit USDT transfers: Report
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Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
