No system is error free. Even corporations like Google and Facebook faced vulnerability issues in their systems. That is the reason they often conduct bug bounty and similar kind of events and award prize money for developers who expose bugs.
A user tricked the exchange and made the system credit 694 USDT under his account. In general, users will get USDT as per the amount of dollars paid (1$ = 1 USDT). In this case, the system credit 694 USDT without the user paying the amount to it. This error is brought into attention by SlowMist. They are a cybersecurity firm located in China.
Is it a Double Spend attack?
When the same amount of coins is spent for more transactions, then it is referred as a double spend attack. But the firm stated that the fault is entirely on the side of the exchange. The system was not identifying flags and accepted a wrong transaction. They also stated that it was not a double spend attack either.
USDT is a cryptocurrency asset developed and owned by Tether. Users have to buy USDT with dollars. Tether promised users that they could anytime return USDT for dollars. So if the value of USDT increases, users can do trading. If it is not going well or need money, users can simply exchange the USDT they have for dollars.
A total of 2.75 Billion USDT exists in the market. So according to tether, they should have 2.75 billion dollars in banks. Doubts raised that the loss has stopped at 694 USDT or it is more? Maybe hackers tricked the system, and only this time cybersecurity firms have got the news. Is Tether safe?
These were the questions raised by people, and the answer is simple. This bug is not witnessed with Tether, but it is found in third-party exchange. Due to poor programming and implementation, it accepted the double spend transaction without cross-checking its status. SlowMist (Cybersecurity firm) has confirmed that it was exchanged fault and not of Tether.
Apart from negativity on Tether, it continues to grow in the market. Another $300 million tokens were printed earlier in March 2018 taking the existed total to $850 million tokens (USDT). It is not right to target Tether with the fault committed by an unknown exchange.