Lagging in illicit stablecoin freezing helps criminals launder funds

While blockchain investigators complain about slow responses from some centralized exchanges and stablecoin issuers when it comes to freezing illicit funds, a new report shows how this process works and how much it has already cost.

Anti-money laundering (AML) compliance solutions provider for the cryptoasset industry, AMLBot, claims that "a significant lag" between the initiation of a freeze and the actual enforcement has already allowed the transfer of more than $78 million in the Tether (USDT) stablecoin on the Tron (TRX) and Ethereum (ETH) blockchains.

According to the AML company, criminals familiar with the freezing process can exploit it, possibly even by developing money laundering tools that automate it during the freeze delay window.

For example, in a specific case presented in the report, it took 44 minutes to freeze USDT on Tron after the suspicious address was flagged.

"During this period, the wallet retained full access to $426,183 USDT, meaning any fast-acting operator could have moved the funds out before the freeze took effect. This isn't a theoretical weakness. It's happening in the wild, and bad actors are watching," AMLBot warned.

According to them, the delay likely happens due to Tether's custom multi-signature smart contract on Tron, meaning that more than one digital signature is needed to confirm a transaction.

Per the authors of the report, this was likely done to improve internal governance and reduce the risk of unilateral actions. However, it also makes a freeze request visible on-chain, which allows criminals to act. A similar setup for USDT was also found on Ethereum, with freezing delays taking up to one hour.

In a specific example provided by the researchers, it allowed the withdrawal of at least $28.5 million in USDT on Ethereum.

"The average amount moved per wallet exceeded $365,000, confirming that this isn't a minor flaw—it's a systemic issue across chains," the report concluded, adding that, in the case of Tron, $49.6 million was withdrawn during freeze delay windows, averaging two-three transfers during the delay.