It should be noted that cases of freezing of stablcoins by their issuers have happened before. In particular, Tether blocked USDT equivalent to $8 million in the fall of 2022, which was necessary due to a law enforcement investigation.

Before that, Circle, which issues the USDC stabelcoin, blocked addresses that interacted with a cryptocurrency mixer called Tornado Cash. The latter has been banned by US regulators and placed on the relevant banned list.

The current case, however, has raised questions about the ethics of the popular company’s actions.

Why cryptocurrency addresses are being blocked

The mentioned wallet of the attacker has about 3 million USDT on it. But since this address is now blacklisted, the wallet owner will no longer be able to move these coins. However, the hacker still has $14.3 million in WETH and $3.6 million in other crypto-assets in the same wallet, so the cryptocurrency community member’s financial standing is hardly threatened.

According to Decrypt's sources, the hacker's address received most of the funds after a major attack on MEV bots last week. As a result, he was quite predictably seen as someone associated with the event.

Now let’s deal with the MEVs that were at the centre of what was going on. Generally speaking, MEV stands for maximum extractable value or maximal extractable value. MEV is the maximum value that can be extracted by a miner or validator by including, excluding or reordering transactions within a block.


As a reminder, validators and miners can choose which transactions they include in the next block. By default, it is more profitable for them to choose the transactions for which a higher fee was paid, since the validator receives a portion of that fee as well. However, the opportunities for validators and miners to make money do not end there. They can also generate additional value by changing the order in which transactions are confirmed.

An example of this is so-called sandwich trading, where special software represented by a MEV bot tries to make a profit on transactions that are pending validation. For example, this transaction could be a large sale or purchase of a particular crypto-asset on a decentralized exchange, which will definitely affect the price of the token pair being traded. In this case, the bot buys or sells a similar coin even before the meaningful transaction is confirmed, deriving profit or value from this process. Here, however, it will receive the coins before there is a noticeable change in the price of the asset and will get rid of them later. In general, MEV bots work all the time, in addition they are relevant for different blockchains, as their logic applies everywhere.


So, last week several bots were using similar tactics. They were looking for transactions in the meme that were awaiting confirmation and could affect the price of trading pairs. However, the attackers sent several “dummy” transactions to extract the funds. Here’s how a PeckShield spokesperson commented on the process

The hackers found a bug in the so-called mev-boost-relay and exploited the vulnerability by becoming a block validator. The second transaction of one of the bots was replaced by their own transaction to make a profit.

That is, in this case, the attackers took advantage of the MEV bot's capabilities, but profited from the transactional shift themselves, as they were the ones who validated the new block. It turns out the hackers did the same thing that such bots usually do.

As a result of these actions, a group of MEV bots lost just over $20 million in crypto. Most of these funds were transferred to the aforementioned address, subsequently blacklisted by Tether.

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This decision by the USDT issuer has caused a mixed reaction among cryptocurrency fans. For example, Polygon co-founder Jaynti Kanani called what happened a “bad precedent”. Allegedly after this, Tether will block even the addresses of bona fide USDT users who are censored for whatever reason.

Fastlane’s co-founder, who sits on Twitter under the nickname Thogard, called what happened “the DeFi trend of most concern in 2023”. Here’s his quote on the matter.

Bots signed these transactions and sent them to the network. They were validated. The problem was not decentralised finance. The blocking of the wallet by Tether means that the company has a beef with the consensus and community of Etherium.

In correspondence with CryptoSlate journalists, a Tether spokesperson explained the blocking decision with the following quote.

Tether regularly works with law enforcement agencies around the world as part of our commitment to cooperation, transparency and accountability. We respect official requests for temporary freezing of funds and are proud of our role as industry leaders in promoting cooperation between the crypto industry and government agencies.

As of today, there are 865 addresses on Tether’s blacklist. The total amount they have in their account is over 456.8 million USDT. That said, back in 2020 Tether has only banned a few dozen addresses. In other words, the company blacklists up to 300 wallets per year on average.


This case should remind cryptocurrency enthusiasts that stabelcoin issuers can add certain addresses to the blacklist and thus block their own tokens on them. While the average user of digital assets is unlikely to encounter such a situation, there is a chance that their funds could be frozen one way or another. So relying solely on tokens in an attempt to preserve the value of your own portfolio is probably not a good idea.