Tether Blacklisting Delay: Alarming $78M in Illicit Funds Escaped, Report Claims

Concern is rising in the crypto space following a recent report suggesting a significant loophole in how Tether handles asset freezing. A delay in the **Tether blacklisting** process may have allowed substantial amounts of illicit funds to evade enforcement.

Understanding the Tether Blacklisting Process and the Delay

According to a report from blockchain compliance firm AMLBot, Tether’s wallet blacklisting doesn’t happen instantly. There’s a lag between initiating the freeze process on Ethereum and Tron and when it becomes effective on-chain.

The report points to Tether’s multisignature contract setup as the source of this delay. What should be an immediate compliance action reportedly turns into a window of opportunity for malicious actors.

The blacklisting procedure involves multiple steps:

• A Tether administrator submits a pending call to ‘addBlackList’ via a multisignature transaction. This publicly flags the address as a candidate.
• A second multisignature transaction is required to confirm the submission and make the blacklisting effective, emitting an ‘AddedBlackList’ event.

The time between these two transactions creates the critical delay.

How Illicit Funds Exploited the Delay

The delay acts as an unintentional warning system. Owners of **USDT** about to be blacklisted can see the first transaction and use the time before the second transaction confirms the freeze to move their assets.

AMLBot’s data suggests this isn’t just theoretical. The report highlights an example on Tron where a 44-minute delay occurred between the submission and enforcement transactions. For attackers tracking Tether’s on-chain activity, this alert allows them to front-run the freeze.

The Reported Impact: Over $78M in Illicit Funds

The AMLBot report indicates that a significant amount of **illicit funds** was withdrawn during these delay windows across both Ethereum and Tron blockchains.

Key figures from the report:

• Over $28.5 million in USDT was reportedly moved on the Ethereum blockchain during freeze delays between November 2017 and May 2025. The average amount moved per instance exceeded $365,000.
• $49.6 million was reportedly withdrawn during freeze delays on the Tron blockchain.
• The total reported amount moved during these delays on Ethereum and Tron combined is $78.1 million.

Exploiting this delay on Tron was not uncommon, with the report stating that nearly 5% of targeted wallets made transfers during the lag, averaging around $291,970 per wallet moved over 2-3 transactions.

Challenges for Crypto Compliance

This report raises questions about the effectiveness and speed of **crypto compliance** actions, even for stablecoins like Tether which have demonstrated a willingness to cooperate with law enforcement.

While Tether, Tron, and partners like TRM Labs have successfully frozen large sums (over $126M in 2024 alone), the existence of this exploitable delay presents a challenge. It suggests that technical implementation details can create vulnerabilities that sophisticated actors are quick to leverage.

AMLBot researchers could not determine if the delay is a technical necessity of the multisig setup or due to human action timing, lacking insight into Tether’s internal procedures. Tether had not publicly commented on the report at the time of the original article’s publication.

Why This Matters for the Tether Stablecoin

As the largest **Tether stablecoin** issuer, Tether’s procedures are under constant scrutiny, particularly regarding compliance and security. The ability to freeze assets linked to crime is often cited as a feature that aids regulatory cooperation and helps clean up the ecosystem.

However, if delays in this process allow tens of millions to escape, it undermines the perceived effectiveness of such measures and could attract further attention from regulators focused on preventing the use of cryptocurrencies for illicit activities.

Summary

An AMLBot report highlights a significant delay in Tether’s blacklisting process on Ethereum and Tron. This lag, reportedly due to the multisignature setup, created a window allowing malicious actors to move over $78 million in USDT before freezing actions became effective. The findings raise concerns about the practical speed and effectiveness of crypto compliance measures and the challenges in preventing the movement of illicit funds in a fast-moving blockchain environment.