USDT Stablecoin Publisher, Tether, Reaps Criticism From Crypto Community

The crypto community has been criticized by Tether. (Photo; Doc. MasterTheCrypto)

JAKARTA - Several stakeholders in the crypto industry criticized USDT issuer Tether for embezzling validator addresses on the blacklist after the address drained US$25 million (Rp371 billion) from the maximum extraction value bot (MEV).

This incident occurred on April 3 at a time when MEV bots lost more than US$20 million (Rp296 billion) in executed sandwich trade transactions. Addresses included in the blacklist managed to take advantage of bugs in MEV plug relays to reverse bot transactions and take USDT 3 million and US$22 million (Rp326 million) in ERC-20 tokens.

Criticism of Tether also came from several figures in the crypto community. Polygon founder Jaynti Kanani described this incident as a "bad precedent," while on-chain detective ZachXBT called it "disappointing." Fastlane founder, Thogard, even called this incident "the most worrying DeFi development of 2023."

Thogard added, "The bot 'victims' have signed the transaction and sent it to the relay. They were executed. The exploitation didn't happen in DeFi. Block Tether implies that they have opinions about Ethereum's consensus/social coating," as quoted by CryptoSlate.

Regarding the reason why Tether blacklisted the address, crypto community members speculated about it. On-chain investigator ZachXBT believes that Tether may have received a court order to blacklist the wallet, while others say that this is evidence of an influential person behind the MEV bots.

"Tether regularly cooperates with law enforcement agencies around the world as part of our commitment to cooperation, transparency, and accountability," wrote a spokesman for Tether, quoted by CryptoSlate.

"We respect the official request to temporarily freeze funds and are proud of our role as industry leaders in promoting cooperation between industry and government authorities," the spokesman added.

The MEV bot is an automated high-frequency trader that relies on blockchain speed and complexity to seize arbitration opportunities. sandwich trade transactions that the bot wants to execute will leverage traders by doing front-runners of their transactions.

Criticism of Tether's actions in including validator addresses on the blacklist is in the spotlight among crypto stakeholders. The perpetrators in the crypto market considered that the action had a bad impact and opened up bad precedents in the industry.