Tether’s wallet freezing mechanism has a critical flaw that lets criminals move millions before their funds are blocked. A recent report by AMLBot, a blockchain compliance firm, revealed that Tether’s two-step blacklisting process creates a time gap that malicious actors exploit. The first step publicly marks a wallet address for blacklisting, while the second step confirms and activates the freeze. This delay can last up to 44 minutes, giving wrongdoers a window to transfer or launder their funds.
Delays in Blacklisting
The AMLBot report analyzed Tether’s multisig contracts on Ethereum and TRON networks. It found that between November 28, 2017, and May 12, 2025, approximately $28.5 million was moved during these delays on Ethereum, with an average of $365,000 per transaction. On TRON, an additional $49.6 million was transferred before restrictions were enforced, totaling $78.1 million in funds that escaped control. About 4.88% of 3,480 blocked wallets on TRON used this time lag to their advantage, making two to three transactions each, with an average of nearly $292,000.
The delay between a freeze request and its on-chain execution creates a critical attack window. This lets malicious actors anticipate the action and move their funds. AMLBot couldn’t determine if the delay is due to technical or human factors within Tether’s multisig process due to a lack of public information.
Stalled Stablecoin Regulation
Meanwhile, US regulation of stablecoins remains stalled. Despite bipartisan interest in establishing a legal framework, two key legislative proposals, the GENIUS Act and the STABLE Act, are stuck due to political tensions. A recent bill led by Senator Bill Hagerty (R-Tenn.) gained some traction in March but has since lost momentum. The Senate majority leader, Chuck Schumer, reportedly advised his colleagues not to commit to the bill in its current form, reflecting internal party divisions.
Systemic Risks
The AMLBot finding highlights not just a technical vulnerability but also questions the ability of stablecoins to respond effectively to illicit activity in real time. The gap in the freezing system suggests that even advanced compliance mechanisms can be bypassed if not properly synchronized with on-chain execution. As regulatory oversight slowly advances, these technological gaps continue to be exploited by malicious actors who benefit from the public and immutable nature of blockchain networks. In an environment where capital flows can move in seconds, a 44-minute delay can be the difference between a thwarted operation and a successful laundering.