​Tether blacklists the address of the hacker who defrauded MEV bots

What’s new? Tether (the issuer of the USDT stablecoin) has blacklisted the address of the hacker who committed the largest MEV bot exploit worth $25 million on April 3. At the time of the blocking, his account held about $3 million USDT and other ERC-20 tokens worth $21 million. This address used the bug to outsmart MEV bots trying to do a sandwich trade. The blacklisting of this address has drawn criticism from the crypto community

[2023/04/10 17:49] USDT blacklisted 0x3c98d617db017f51c6a73a13e80e1fe14cd1d8eb in block 17019365 https://t.co/BDLUzDkLb4

— usdt blacklist (@usdtblacklist) April 10, 2023

In sandwich trade, a bot places an order to buy an asset, aiming to do so faster than a real trader in order to then sell to him at an already inflated price.

Community reaction. On Twitter, an engineer of the Kraken crypto exchange under the nickname Artur called Tether’s actions “lame,” explaining that MEV bots also take advantage of traders without encountering any opposition. On-chain sleuth ZachXBT allowed the possibility that Tether’s blacklisting of the hacker could be the result of a court ruling.

they likely received a court order if they did it.

— ZachXBT (@zachxbt) April 10, 2023

For his part, Jaynti Kanani, the co-founder of the Polygon blockchain, called the USDT issuer’s action a “bad precedent,” and Polygon-based Fastlane protocol co-founder Jordan Hagan called it the “most concerning DeFi development of 2023.” He added that Tether has blocked hackers before, but the concern is that the company is willing to freeze large sums based on network activity at the consensus level in the Ethereum ecosystem’s main blockchain.

To clarify, tether has blocked hackers in the past - nothing new there. It is VERY CONCERNING if Tether is willing to block/unblock large amounts based on activity in the consensus layer (beacon chain). What happens when tether disagrees w/ the beacon chain?

— Thogard (@ThogardPvP) April 11, 2023

Tether freezes a wallet with 5 million USDT on the Ethereum blockchain

Data on the reasons for the freeze and the owner of the wallet have not yet been released

Read further

About MEV bots. Maximal Extractable Value (MEV) is a way for miners or validators to gain additional value by creating a specific sequence of transactions when creating a block. MEV bots can be used to find speculative transactions with higher execution fees.

The method is often practiced by independent network members called searchers. They run sophisticated algorithms to find profitable positions to receive MEVs and use special bots to process the desired transactions. Such manipulations significantly increase the load on the network and result in high fees.

On March 11, as a result of the MEV bot activation by one of the pools of the decentralized exchange Uniswap v2, a user exchanged 2 million USDC stablecoins for 0,05 USDT. This happened against the background of the collapse of Silicon Valley Bank (SVB) and the loss of the stablecoin’s peg to the US dollar.