Brothers stole $25m from Ethereum MEV bots, prosecutors allege

A pair of MIT-educated brothers made off with $25 million in a “novel scheme” that targeted crypto trading bots on the Ethereum blockchain, US prosecutors allege.

In an indictment unsealed Wednesday, prosecutors charged Boston’s Anton Peraire-Bueno, 24, and New York’s James Pepaire-Bueno, 28, with conspiracy to commit wire fraud, wire fraud, and conspiracy to commit money laundering.

“The defendants’ scheme calls the very integrity of the blockchain into question,” Damian Williams, US Attorney for the Southern District of New York, said in a statement.

“This alleged scheme was novel and has never before been charged.”

Anton Peraire-Bueno didn’t immediately respond to a DL News inquiry.

The alleged scheme took advantage of three traders’ MEV bots — Ethereum-based, automated trading programs that scan the blockchain seeking profitable opportunities to front-run pending transactions.

The brothers also exploited a vulnerability in Flashbots, software that hides pending transactions on Ethereum in order to limit the efficacy of MEV bots, prosecutors allege.

Through the alleged scheme, the brothers tricked the three traders’ MEV bots into buying illiquid tokens worth $25 million, according to prosecutors.

Using the Flashbots exploit, the brothers then tampered with the pending transactions to acquire the $25 million in stablecoins and other, more liquid tokens the MEV bots had used to purchase the illiquid tokens, prosecutors allege.

The MEV bots, which had assumed they could profit off the purchase of the illiquid tokens by immediately selling them at a markup, were left holding the bag, according to the indictment.

“As a result of these actions, the Victim Traders’ final sell transactions could not take place,” the indictment reads. “The illiquid cryptocurrencies which the Victim Traders purchased in the frontrun transactions had been rendered effectively worthless.”

In the months before and after the exploit, the brothers had searched for ways to dodge accountability, according to prosecutors. Among other things, their web searches allegedly included “how to wash crypto,” “cefi exchanges with no kyc,” “top crypto lawyers,” and “wire fraud statute / wire fraud statute of limitations.”

“As alleged in today’s indictment, the Peraire-Bueno brothers stole $25 million in Ethereum cryptocurrency through a technologically sophisticated, cutting-edge scheme they plotted for months and executed in seconds,” Lisa Monaco, deputy attorney general, said in the statement.

“As cryptocurrency markets continue to evolve, the Department will continue to root out fraud, support victims, and restore confidence to these markets.”

The brothers were arrested Tuesday, according to prosecutors. If the brothers are found guilty, they face a maximum sentence of 20 years in prison for each count.

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can contact him at aleks@dlnews.com.