Tether Exchange Vulnerability Raises Security Concerns, New Research Suggests USDT Wash Trading on Kraken

This week, US-Dollar pegged stablecoin Tether once again captured cryptocurrency community attention for the wrong reasons with poorly-implemented Tether exchange integration resulting in the successful execution of a double spend.

Tether's tenuous relationship with the cryptocurrency market has been further stressed by an in-depth investigation into USDT movement on Kraken that experts labeled as "Indicative of wash trading."

Translated, the tweet reveals that by sending a transaction to an unnamed exchange without entering correct field values on a transaction, a user was able to successfully execute a double spend.

Yesterday's #USDT issue was related to the implementation logic of a specific exchange and not with either Tether or the OMNI Protocol.

"When a digital asset exchange is processing a USDT deposit, it may fail to verify if the validity of the transaction is"true".

A user's account can be credited with USDT, even if the deposit failed, and the user will be able to trade with the tokens credited.

While the small-scale double spend controversy appears to stem from a minor exchange implementation issue, a new study released by Bloomberg on Tether trading activity on popular cryptocurrency exchange Kraken may have far more serious implications.

Published via Bloomberg by a group of analysts on June 29, the analysis examined Kraken order book data that consisted of 56,000 trades between May 1 and June 22, revealing several data points that market experts have highlighted as potentially indicative of wash trading.

The impact of wash trading and unscrupulous liquidity management techniques within the cryptocurrency market is a pressing issue in the current crypto ecosystem.

"Strangely specific order sizes extending to over 5 decimal places occurred frequently within the dataset examined by the investigative team, a factor that causes Abrantes-Metz and Williams to"suspect that such numbers could be signals to cheaters' automated trading programs - triggering automated wash trading.