A Crypto Trader Loses $215,000 in a Stablecoin Swap Attack

Imagine you go to buy something at a shop, but just before you pay, someone jumps in, buys everything, increases the price, and then sells it back to you at a higher rate. This is precisely what happened to a crypto trader but in the digital space!

A crypto trader lost almost 98% of the value of a $220,764 stablecoin transfer on March 12 because of a sandwich attack. The attack was carried out by a Maximum Extractable Value (MEV) bot. It only took eight seconds for the MEV bot to front-run a transaction worth over $215,500 and exchange $220,764 worth of USD Coin stablecoin for $5,271 worth of Tether.

An analysis of the Ethereum block explorer shows that the MEV attack happened on the USDC-USDT liquidity pool of the decentralized exchange Uniswap v3. The attack locks up $19.8 million worth of value here.

Source: Etherscan How the Trader Lost $215,000 in Seconds

The founder of The DeFi Report, Michael Nadeau, says that the MEV bot front-ran the transaction by taking all the USDC liquidity out of the Uniswap v3 USDC-USDT pool and then putting it back in after the transaction was complete.

From the $220,764 swap, the attackers tipped Ethereum block builder “bob-the-builder.eth,” $200,000, and profited $8,000 themselves, Nadeau said.

Using “internal tools,” DeFi researcher “DeFiac” speculates the same trader using different wallets has fallen victim to six sandwich attacks overall. They said that all the money first moved from the borrowing and lending protocol Aave before going to Uniswap.

Around 9 a.m. UTC on March 12, an MEV bot sandwich attack hit two of the wallets. A sandwich attack was carried out on Ethereum wallets with addresses 0xDDe…42a6D and 0x999…1D215, resulting in transactions that took place three to four minutes earlier and totalled $138,838 and $128,003, respectively.

The trader who sent $220,762 made the same swap in the Uniswap v3 liquidity pool as the other two people.

Is this a case of money laundering?

Some people think the trades might be attempts to launder money.

“If you have NK illegal funds, you could make a very MEV-able tx, send it privately to an MEV bot, and have them arbitrage it as a bundle,” 0xngmi, founder of the crypto data dashboard DefiLlama, said.

“That way, you lose almost no money and clean the funds with minimal losses.”

Nadeau initially criticized Uniswap, but later he admitted that the transactions didn’t come from Uniswap’s front end, which has MEV protection and slippage settings by default.

After Uniswap CEO Hayden Adams and others explained the defenses Uniswap has in place to stop sandwich attacks, Nadeau took back what he said.

Source: Hayden Adams

This news is a big warning for crypto traders. Sandwich attacks are a serious issue, especially on exchanges that don’t have a central authority. Before you make a big trade, you should always check the slippage and MEV settings. Otherwise, just like this trader, your money could vanish in seconds!