A postponement in Tether’s wallet blacklisting procedure has led to the transfer of over $78 million in illicit funds prior to the execution of enforcement actions.
A report issued on May 15 by blockchain compliance firm AMLBot highlighted a noteworthy delay between the initiation and finalization of Tether’s blacklisting on both the Ethereum and Tron blockchains.
Although the stablecoin issuer possesses the capability to freeze funds as part of its compliance measures, AMLBot has identified that the technical design of Tether’s multisignature contract results in a delay, providing malicious actors with an opportunity to act before restrictions can be enforced.
The Two-Step Blacklist Procedure: A Vulnerability for Criminal Activity
The blacklisting protocol comprises two separate multisignature transactions. The initial transaction submits a wallet address as a candidate for blacklisting through the “addBlackList” function.
The follow-up transaction finalizes the action, confirming the submission and initiating the actual freezing of funds. The challenge arises from the time interval between these two actions.
One recorded instance on the Tron network illustrated this issue: a blacklisting request was submitted at 11:10:12 UTC, yet the enforcement transaction did not occur until 11:54:51 UTC—a delay of 44 minutes.
According to AMLBot, this creates an advance warning for those observing the blockchain, enabling them to relocate assets prior to the application of restrictions.
“This lag between a freeze request and its on-chain execution establishes a critical vulnerability, allowing wrongdoers to preemptively transfer or launder funds before the freeze is implemented,” the report stated.
From November 28, 2017, to May 12, 2025, AMLBot estimated that $28.5 million was transferred during such freeze-delay intervals on Ethereum, with transactions averaging $365,000 each.
30 new $USDT addresses were sent to the @Tether_to blacklist in May. This is the largest number of addresses in the last year.
Out of 30 addresses, 16 addresses are associated with the platform “imToken Tokenlon”.
Tokenlon, whose DEX is embedded in the imToken wallet, is… pic.twitter.com/l0vTXR9P4K
— AMLBot (@AMLBotHQ) May 13, 2025
An additional $49.6 million was moved on the Tron network before freezes could be enforced. Overall, this results in a total of $78.1 million in assets that evaded restriction due to timing discrepancies.
Significantly, the report noted that 4.88% of the 3,480 wallets blacklisted on Tron capitalized on this delay, with each wallet executing between two to three transactions, accumulating an average of nearly $292,000.
AMLBot indicated that it could not determine with certainty whether the delays stemmed from technical limitations or human error within the multisignature process, citing a lack of transparency regarding Tether’s internal operations.
Regulatory Scrutiny Surrounds Stablecoins
In related news, the issue of stablecoin regulation remains a hot topic for discussion.
Legislative measures like the GENIUS Act and the STABLE Act have stalled in Congress, hindered by political tensions influenced by former President Donald Trump’s expanding cryptocurrency initiatives.
This divide persists despite increasing bipartisan interest in the advancement of crypto regulations.
The stablecoin regulation bill, led by Senator Bill Hagerty (R-Tenn.), successfully cleared the Senate Banking Committee in March, garnering support from five Democratic members.
However, momentum has since diminished amid escalating political discord.
Concerns from Democrats reportedly grew during a private caucus meeting last week, where Senate Majority Leader Chuck Schumer cautioned colleagues against endorsing the bill in its current iteration.
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