Crypto trader swaps $733,000 for just $19,000 in large sandwich attack

A cryptocurrency trader appears to have swapped $732,000 for just $19,000 on Wednesday, potentially the result of a large sandwich attack, according to onchain data . 

The event has attracted significant attention on X due to the large amount of money at play and odd nature of the losses. "Unknown entity got sandwiched for 714k today on six separate USDC -> USDT swaps," user TheDEFIac posted to X . "They swapped 732583.429405 USDC for 18636.232611 USDT."

The trader was using a USDC-USDT liquidity pool on Uniswap V3, which is one of the most liquid trading pools for stablecoins. According to DeFi researcher Michael Nadeau, an MEV bot front-ran the trader's transaction by swapping out all of the liquidity causing a disparity in prices between two coins supposed to be pegged to $1. The bot also tipped a block builder called bobTheBuilder to process its transaction first.

Pseudonymous DeFiLlama developer 0xngmi suggested the poorly-executed swaps could have been part of a deliberate effort to launder funds. "I think some of these really bad swaps could be money laundering," 0xngmi posted to X .  "If you have [North Korean] illicit funds you could construct a very MEV-able [transaction], then privately send it to a MEV bot and have them arb it in a bundle that way you wash all the money with close to 0 losses."

MEV bots operate like blockchain-based high frequency traders which focus on using speed and the technicalities of how blockchains work to capture arbitrage opportunities. 

A sandwich attack is a type of front-running exploit where an attacker places two transactions around a victim’s transaction to manipulate the price and profit from the difference. Last August, an MEV bot run rolled out sandwich attacks that earned the user millions of dollars in ETH.

Self-proclaimed Etherscan aficionado, TheDEFIac, posted a thread that also pointed to the possibility that the "bad swaps" might have been executed in order to launder funds. In one particularly odd transaction , the trader swapped $220,806 worth of USDC for just over $5,000 in USDT. 

"The interesting part here is how did the funds travel before each of the sandwiched [transactions]. All wallets follow the same path, which is rather long and quite unsual," TheDEFIac posted . Security experts often note that hackers looking to disguise funds will send money through multiple inefficient hops and use more protocols than necessary to better obscure funds. 

Tracking the series of transactions, TheDEFIac said in an X thread that before "getting sandwiched" the funds came from wallets held on the Binance and Bybit exchanges and then were "deposited into USDC-USDT."

"This is rather curious and hints that this could be either someone burning a lot of money or this could possibly be some weird kind of money laundering attempt," TheDEFIac added.