Tether faces review for $55.9 million in losses due to delayed execution of freeze

Blockchain asset investigator reveals delay vulnerability in Tether freezing process

Darcy, blockchain asset recovery investigator and co-founder of FlashRescue, revealed that during the process of Tether freezing an address, the target funds have been transferred out of the wallet. This incident triggered market questions about the effectiveness of the stablecoin issuer freezing procedures.

Tether's freezing speed raises concerns

As Circle's main competitor and USDC issuer, Circle continues to be criticized for failing to freeze marked or stolen assets in a timely manner in 2026. Today, Tether, which has previously been praised for its freezing efficiency, is facing review of the timeliness of its actual freezing process.

Darcy (who publicly shared progress as @DarcyAri and conducted a joint investigation with partner companies) described a recent case in which funds from a marked wallet had been transferred out during the freezing process. This time lag caused some assets to escape before the restrictions took effect, thus reducing the total amount that could ultimately be frozen.

The stablecoin issuer has long been recognized for its willingness to act quickly on suspicious transactions, especially compared to Circle. But the latest incident suggests that even Tether's system has a key flaw: a measurable delay between proposing a freeze and executing it on the blockchain.

Systemic delays and capital losses

An analysis of a total of 2955 Tether freeze events on Ethereum and wavefields showed that the average time between freezing proposal and execution was 2 hours, 16 minutes and 15 seconds. The main technical limitation is the need for multi-signature confirmation, which slows down the freezing process. As a result, monitored wallets can sometimes move funds within this window and escape freezing.

Data shows that at least 60 addresses successfully cleared all USDT positions between the freeze proposal and the actual execution, with a total value of US$20.4 million. In these cases, transfers typically begin approximately 14 minutes after the freeze is initiated, and most assets are transferred within the first 15 minutes.

Another 113 addresses successfully transferred some funds before the freeze, involving an amount of approximately US$35.5 million. A high-profile incident occurred in July, when Tether responded to U.S. Treasury Department sanctions on Iran's central bank and some of its wallets. Although Tether ultimately froze $131 million in sanctioned assets, approximately $34 million was withdrawn before the block was confirmed.

Tether said its process involves coordinating directly with investigators during case processing, rather than taking action after funds are dispersed. The company said it has worked with more than 340 law enforcement agencies in 65 countries to handle more than 2300 cases and assisted in freezing assets totaling more than $4.4 billion.

Comparison with Circle practice

Circle often explains its prudent approach based on legal restrictions. CEO Jeremy Allaire explained in Seoul that Circle acted only on direct orders from law enforcement agencies or courts, which resulted in long delays and missed opportunities to stop the flow of illicit funds. Chain analyst ZachXBT has identified more than a dozen major cases since 2022, including a $280 million Drift Protocol attack related to North Korean actors, of which $420 million in unauthorized assets were successfully transferred due to Circle's failure to implement the freeze in a timely manner.

Wisconsin prosecutors even filed criminal charges against Circle after the company said it could not return USDC to fraud victims as required by law, highlighting unresolved tensions with regulators.

Selected Solutions and Monitoring Tools

Although the average time lag in Tether execution allows sophisticated actors to predict and circumvent restrictions, the total amount of money lost represents only a small portion of the total frozen assets. The company's largest Iran-related actions, including an April freeze of $344 million and other coordinated actions, have brought its total Iran-related freezes to approximately $475 million. Investigators such as Darcy also pointed out that once stolen cryptocurrencies are mixed with unrelated funds in new addresses, recovery becomes extremely difficult because Tether rarely freezes pools of funds that cannot be clearly linked to illegal activity.

Given these operational delays and the increasing sophistication of illegal actors, market participants emphasize the need for smarter alerts, continuous tracking and reliable notifications. Related tools now provide portfolio consolidation, real-time pricing, detailed charts and multi-currency management capabilities. With instant price alerts, customizable news filtering, and newly listed altcoins discovery capabilities, users can respond more quickly to market changes and monitor key macro events such as Federal Reserve interest rate movements without having to register an account. Such platforms are becoming particularly important for individual investors and asset recovery experts who need to cope with evolving risks.

Analysis showed that at least 60 monitored addresses successfully transferred all USDTs before the freeze took effect, and another 113 addresses partially emptied wallets, revealing the limitations of the current freeze mechanism.