Stablecoin issuer Tether has blacklisted the wallet address that managed to front-run Maximal Extractable Value (MEV) bots last week.
An alert from a USDT blacklist tracker on Tuesday notified users that Tether had blacklisted the validator, who holds $3 million worth of USDT in his wallet.
[2023/04/10 17:49] USDT blacklisted 0x3c98d617db017f51c6a73a13e80e1fe14cd1d8eb in block 17019365 https://t.co/BDLUzDkLb4
— usdt blacklist (@usdtblacklist) April 10, 2023
Last week, the so-called “rogue validator” was slashed from Ethereum after he got ahead of MEV bots’ sandwich attacks. The validator made a profit of $25 million by front-running these bots, which led to mixed reactions within the crypto community.
MEV bots extract value from unsuspecting users through various types of front-running attacks, making them an unpopular force in the world of decentralized finance. In fact, a consortium of Ethereum projects banded together to launch MEV Blocker – a tool that aims to tackle the issue of these bots that have stolen an estimated $1.38 billion from users on the blockchain.
Given the number of users that have fallen victim to this everyday front-running from MEV bots, it is hardly surprising that many rallied behind the validator that exploited them.
Unsurprisingly, Tether’s move to blacklist the validator sparked a flurry of protest from several industry watchers, who argued it was an unjust decision.
“Tether blocked the address that attacked MEV bots but doesn’t block MEV bots themselves which attack users every day. Where is the logic?” said Alex Smirnov, co-founder of deBridge Finance.
Polygon co-founder Jaynti Kanan called it a “bad precedent,” and on-chain sleuth ZackXBT said he hoped the sandwich bot exploiter would swap their USDC before potentially similar actions are applied on the stablecoin address.
hopefully they swap the USDC pic.twitter.com/mb7RNWxXmJ
— ZachXBT (@zachxbt) April 10, 2023
On-chain data shows that the sandwich exploiter heeded ZachXBT’s message, moved the USDC out of their main wallet, and performed a sequence of lending and borrowing actions on Aave and Compound that would fend off the threat of a Circle blacklisting.
Sandwich Exploiter moved their USDC out of their main wallet due to @zachxbt message🤝
Then supplied USDC to AAVE + Compound. Sent the "lent" USDC deposits back to exploit wallet
Most likely to circumvent USDC blacklist as Circle would have to blacklist all "lent" USDC deposits pic.twitter.com/zXf9UDJ1HY
— Umbrella (@umbrella_uni) April 10, 2023