- A DeFi trader suffered a loss exceeding $700K due to a sandwich attack on the Uniswap exchange.
- The trader exchanged 732,583 USDC for USDT but ended up receiving only 18,636 USDT.
- Experts raised suspicions that the transactions might be linked to money laundering based on the movement of the funds.
A DeFi trader captured the attention of the cryptocurrency community on Wednesday after losing over $700K in stablecoins to a sandwich attack on the Uniswap v3 protocol. MEV bots targeted the trader through six separate transactions that experienced 100% slippage.
Industry experts speculated that the transactions could be indicative of a money laundering scheme due to their distinct pattern.
Funds lost by DeFi trader in Uniswap sandwich attack
An unidentified DeFi trader became a topic of interest among crypto enthusiasts after suffering losses while trying to conduct a swap on a Uniswap liquidity pool.
The trader’s attempt to exchange 732,583 USDC for USDT was thwarted by a sandwich attack before the transaction could be confirmed. During six different transactions, the user’s funds were intercepted, leading to a total loss of $714K in USDT. One particular swap involving 221K USDC to USDT resulted in a staggering loss of 216K USDT.
Sandwich attacks function as a front-running tactic in DeFi trading, where an attacker takes advantage of the transparency provided by the blockchain to execute two transactions—before and after—a user’s significant order for profit from the price variance.
The trader engaged with a Uniswap v3 liquidity pool that held more than $35 million in total assets in the USDC–USDT pool.
Michael Nadeau, the founder of DeFi Research, commented that the pool’s liquidity was depleted by an MEV bot that front-ran the trader’s move. The attacker even gave a $200K tip to an anonymous block builder named bobTheBuilder, making an $8K profit from this transaction.
MEV bots are automated trading tools designed to maximize gains by exploiting opportunities within blockchain transactions.
However, it seems the trader unwittingly instigated the attack by utilizing excessively high slippage for the transfer.
“This didn’t occur on the Uniswap interface (which suggests slippage). It was executed via the old v3 swap router (not the Universal Router). It appears the slippage was set to 100% for this trade,” remarked Uniswap’s vibe curator Niko in a reply on X.
Hayden Adams, the founder of Uniswap Labs, also responded to numerous comments on X, suggesting that the attack might have stemmed from a flawed bot or a subpar user interface.
He further indicated that the trader could have avoided the loss by opting for a lower slippage tolerance.
Nevertheless, the nature of the transactions has sparked theories around a potential money laundering effort. A significant factor is that the transactions did not originate from Uniswap’s front-end interface, which provides MEV protection and allows for slippage settings adjustments.
Additionally, the founder of DefiLlama, Oxngmi, noted in a post on X that the address involved in these transactions was funded via a mixer-like service.
Moreover, the funds deposited came from another address that had previously withdrawn assets from Aave before moving them to a different address.
“You have multiple single-use addresses transferring money amongst themselves in convoluted ways that are difficult for software to trace. A standard user would typically transfer the USDC directly between addresses,” added Oxngmi.
Other participants in the market have also suggested that these attacks could be part of an intentional money laundering operation.