Two brothers with backgrounds in advanced mathematics and computer science in the United States have been arrested and charged for suspected MEV attack arbitrage on the Ethereum network. They are accused of wire fraud and conspiracy to launder money. The authorities have indicted and arrested the brothers, Anton Peraire-Bueno and James Peraire-Bueno, on charges of conspiracy to commit wire fraud, wire fraud, and conspiracy to launder money. Each charge carries a maximum sentence of 20 years in prison.
Of particular note, these charges stem from the brothers’ alleged exploitation of the Ethereum blockchain’s characteristic of block generation every 12 seconds. Through complex operations, they were able to steal approximately $25 million worth of cryptocurrency in a short period of time. The brothers are currently facing trial.
According to the statement from the Department of Justice, Damian Williams, the Assistant United States Attorney for the Southern District, expressed concern over the defendants’ plan, which undermined the integrity of the blockchain. They used their expertise to manipulate and control protocols relied upon by millions of Ethereum users, completing the heist in just 12 seconds.
Deputy Attorney General Lisa Monaco added, “Their criminal activity did not evade the investigation of the Department of Justice and IRS-CI special agents. We will continue to root out fraud in the cryptocurrency markets, support victims, and restore market confidence.”
Thomas Fattorusso, a special agent with the IRS-CI, stated their unwavering determination to trace the flow of funds.
According to the statement, Anton Peraire-Bueno and James Peraire-Bueno are brothers from Boston and New York City, respectively, aged 24 and 28. They studied mathematics and computer science at one of the most prestigious universities in the United States. Utilizing their acquired skills and specialized knowledge in cryptocurrency trading, they designed and implemented this plan over several months.
In the attack, Anton and James are accused of manipulating and controlling the verification and inclusion process of transactions, illegally obtaining unconfirmed private transactions, and using that access to modify certain transactions to gain the victims’ cryptocurrency.
The statement from the U.S. authorities may simplify the technical details, but their mention of transaction order manipulation and hijacking of unconfirmed transactions suggests that the brothers may have obtained illicit funds through MEV attacks.
MEV, or Maximal Extractable Value, refers to the ability of block producers (including miners or validators) in a blockchain system to extract additional profits by reordering, inserting, or deleting transactions in a block. One common form of MEV attack is a front-running attack, where an attacker, upon seeing a transaction about to be submitted to the blockchain, exploits this information to insert their own transaction in advance, gaining unfair advantages before price fluctuations occur. This attack can be achieved by paying higher transaction fees to ensure that their transaction is processed before the target transaction.
However, MEV is a natural phenomenon in blockchain transactions, particularly in decentralized finance (DeFi) applications. Whether MEV constitutes fraud, especially in a legal sense, remains a topic of debate within the blockchain community and legal field.
According to the statement, after ANTON and JAMES stole the victims’ cryptocurrency, they refused to return it and took various measures to conceal their identities and illicit gains. This included studying the victims’ transaction behavior, setting up shell companies, using multiple private cryptocurrency addresses, and foreign cryptocurrency exchanges. After the attack, the brothers transferred the stolen cryptocurrency through a series of transactions aimed at concealing the stolen funds’ source and ownership.
Throughout the process, ANTON and JAMES also conducted internet searches on how to carry out the attack, methods to conceal their involvement, cryptocurrency exchanges with limited KYC procedures (to launder their illicit proceeds), specialized attorneys for cryptocurrency cases, extradition procedures, and other crime-related information mentioned in this indictment. These searches demonstrate their deliberate planning and execution of the attack.