Crypto trader gets sandwich attacked in stablecoin swap, loses $215K
On March 12, a cryptocurrency trader experienced a staggering loss due to a sandwich attack, a sophisticated tactic used by Maximum Extractable Value (MEV) bots that exploit decentralized exchanges. The trader attempted to execute a transfer amounting to $220,764 in USD Coin (USDC), only to receive a mere $5,271 in Tether (USDT) within a span of eight seconds, ultimately losing nearly 98% of the funds.
The attack occurred within the USDC-USDT liquidity pool on Uniswap v3, a decentralized exchange where approximately $19.8 million in assets are currently locked. Analyzing Ethereum’s blockchain through Etherscan reveals that the MEV bot swiftly front-ran the transaction. This involved draining the entire USDC liquidity from the pool right before the trader’s execution and then restoring it after, securing a profit of over $215,500 from the transaction.
Michael Nadeau, founder of The DeFi Report, indicated that the perpetrator also tipped an Ethereum block builder known as “bob-the-builder.eth” $200,000 from the swap, ultimately pocketing an $8,000 profit. Analysis by DeFi researcher “DeFiac” suggests that the same trader may have fallen victim to six sandwich attacks in total, raising concerns regarding the security of their strategies. All transactions were traced back to borrowing and lending protocol Aave before being sent to Uniswap.
On the same day, two other wallets faced similar MEV bot sandwich attacks, registering transactions of approximately $138,838 and $128,003 just minutes prior to the larger transaction. These earlier trades mirrored the same swap executed by the trader who sustained the massive loss.
The speculations surrounding these transactions extend to potential money laundering tactics. Experts note that individuals with illicit funds could create transactions that attract MEV bots and subsequently utilize them for arbitrage, effectively laundering money with minimal losses.
While Nadeau initially criticized Uniswap for failing to protect users from such attacks, he later acknowledged that the transactions were not initiated through Uniswap’s front end, which is designed to incorporate MEV protections and default slippage settings. This acknowledgment came after clarification from Uniswap CEO Hayden Adams and others regarding the platform’s defenses against sandwich attacks.
The incident not only highlights vulnerabilities within decentralized finance but also raises broader discussions about the ethical implications of automated trading strategies in the blockchain space.
