- A DeFi user lost over $700K to a sandwich attack on the Uniswap exchange.
- The user swapped 732,583 USDC to USDT but only received 18,636 USDT.
- Experts speculated that the transaction could be a money laundering scheme due to how the funds were moved.
A DeFi trader became the subject of discussion among crypto community members on Wednesday after losing more than $700K worth of stablecoins to a sandwich attack on the Uniswap v3 protocol. MEV bots attacked the trader on six separate transactions traded with 100% slippage.
Community experts speculated the possibility that the trades were a money laundering attempt due to the pattern that each transaction followed.
DeFi trader loses funds in a sandwich attack on Uniswap
An unknown DeFi trader caught the attention of crypto community members after losing money in an attempt to perform a swap on a Uniswap liquidity pool.
The user attempted to swap 732,583 USDC to USDT but encountered a sandwich attack before confirmation. The user’s funds were intercepted on six different transactions, resulting in the loss of $714K in USDT. One particular swap of 221K USDC to USDT resulted in a loss of 216K USDT.
Sandwich attacks are a front-running strategy in DeFi trading. It involves an attacker exploiting the blockchain’s transparency by placing two transactions — before and after — around a user’s large order to profit from the price difference.
The trader used a Uniswap v3 liquidity pool, where he placed the funds in a USDC–USDT pool with over $35 million worth of assets in it.
Michael Nadeau, founder of DeFi Research, noted that the pool’s liquidity was drained by an MEV bot that front-ran the user’s transaction. The attacker also gave a $200K tip to an anonymous block builder named bobTheBuilder and made a profit of $8K on the transaction.
MEV bots are automated trading programs that aim to maximize profits by exploiting opportunities across blockchain transactions.
However, the trader appears to have been the cause of the attack due to the high slippage used in executing the transfer.
“This was not done on the Uniswap interface (which has suggested slippage). This was done through the old v3 swap router (not the Universal Router). Looks like they set slippage to 100% for this trade,” stated Uniswap’s vibe curator Niko in a reply on X.
Uniswap Labs founder Hayden Adams also responded to several comments on X, stating that the attack may have been caused by a faulty bot or poor user interface.
Adams further noted that the user could have prevented the loss if they had set a lower slippage tolerance.
However, the nature of the transactions has led to speculations that it might have been an attempt to launder funds. A major reason is that the transactions did not come from Uniswap’s front-end interface, which offers MEV protection and options for slippage settings.
Additionally, anonymous DefiLlama founder Oxngmi noted in an X post that the address involved in the transactions was funded through a mixer-like platform.
Also, the deposited funds originated from another address, which had previously withdrawn assets from Aave before transferring them to a separate address.
“So you have a bunch of single-use addresses passing money to one another in weird ways that are hard to track for software. A normal user would instead simply transfer the USDC directly among addresses,” Oxngmi added.
Several other market participants also suggested the attacks could be an intentional money laundering scheme.
