Exploitable Time Lag in Tether's Freeze Mechanism Allows Illicit Actors to Bypass Enforcement

A recent report has exposed a critical vulnerability in Tether's freeze mechanism, allowing illicit actors to bypass enforcement. Blockchain analytics firm AMLBot revealed that 170 wallets exploited the time lag in freezing actions.

A recent report by blockchain analytics firm AMLBot has exposed a critical vulnerability in Tether’s freeze mechanism, allowing illicit actors to bypass enforcement. The report, titled "Chaining Together: How 170 Wallets Exploited Tether’s Freeze Lag to Deflect Enforcement and Move Nearly $78 Million," details how 170 wallets exploited the time lag in freezing actions to move funds across Ethereum and Tron networks before blocks took effect.

Tron Network Enables $49.6M in Illicit Withdrawals

The analysis showed that Tether’s freeze mechanism on Tron suffers from an operational lag due to its multi-signature governance, which requires multiple approvals before a freeze is enforced. This structure created a delay window of up to 60 minutes during which wallet owners could move funds out before the enforcement locks the assets.

Researchers confirmed that 170 out of 3,480 blacklisted wallets took advantage of the time gap, each making up to three transactions. The average withdrawn amount reached $291,970 per wallet, while the median was $65,370. Most exploiters used real-time monitoring to detect freeze requests and acted before completion.

The report noted that $49.6 million was successfully withdrawn from the Tron network by accounts flagged for suspicious activity. While Tether’s contract design secures against unilateral actions, it introduced the vulnerability. AMLBot stated that criminals used automated tools to monitor Tether’s contract interactions to avoid the freeze.

Ethereum Network Hit as Freeze Timing Fails to Prevent $28.5M Exit

Tether’s delay in enforcing blacklists affected Ethereum as well, with bad actors withdrawing $28.5 million during freeze windows. Tron wallets received early alerts on freeze transactions and responded swiftly before enforcement. The lag again stemmed from the multi-signature system required sign-offs from different parties.

AMLBot’s report suggested that bots monitored Tether’s smart contracts and alerted wallet holders when initiating freeze attempts. This tactic gave bad actors a crucial advantage on Ethereum’s fast-moving network. On-chain behavior indicated that automation was in play, even if the bots were not directly observed.

Security firm PeckShield reviewed the findings and confirmed the structural vulnerability in the freeze delay process. The firm clarified that the issue lies in the process, not the

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