Two brothers with backgrounds in advanced mathematics and computer science in the United States were arrested and charged on suspicion of conducting MEV (Miner Extractable Value) arbitrage attacks on the Ethereum network. They have been accused of wire fraud and conspiracy to commit money laundering.
Background:
The founder of the open-source software Tornado Cash was sentenced to 64 months in prison for money laundering.
The US court approved the seizure of 279 cryptocurrency accounts, including proceeds from North Korean hacker crimes and Chinese money laundering.
Table of Contents:
1. Background of the Two Brothers
2. Is MEV Attack Considered Illegal?
3. Attempt to Conceal Identities and Money Flow
4. US Authorities’ Actions on the 15th
5. Indictment and Arrest
6. Technical Manipulation and Theft of Cryptocurrency
7. MEV Attack and Extracting Illicit Funds
8. Efforts to Hide Stolen Funds
9. Related Reports
Two brothers, Anton Peraire-Bueno and James Peraire-Bueno, were indicted and arrested by US authorities on charges of conspiracy to commit wire fraud, wire fraud, and conspiracy to commit money laundering. Each charge carries a maximum sentence of 20 years in prison.
Notably, these charges stem from the brothers’ alleged exploitation of the Ethereum blockchain’s property of producing a block every 12 seconds. Through complex operations, they were able to steal approximately $25 million worth of cryptocurrency in a short period. The brothers are currently facing trial.
According to a statement from the Department of Justice, Damian Williams, the US Southern District Federal Prosecutor, expressed that the defendants’ plan undermined the integrity of the blockchain. They used their expertise to manipulate and control the protocol 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 go unnoticed by the Department of Justice and IRS-CI special agents. We will continue to root out fraud in the cryptocurrency market, support victims, and restore market confidence.”
Thomas Fattorusso, an IRS-CI special agent, affirmed their determination to trace the flow of funds.
The statement notes that 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 and utilized their acquired skills and cryptocurrency trading expertise to design and execute this plan within months.
In the attack, Anton and James are accused of tampering with and manipulating the verification and addition processes of transactions, illicitly obtaining unconfirmed private transactions, and using this access to alter certain transactions to gain control of victims’ cryptocurrency.
The US authorities’ statement may simplify the technical details, but their mention of transaction order manipulation and hijacking unconfirmed transactions suggests that the brothers may have obtained illicit funds through an MEV attack.
MEV (Maximal Extractable Value) refers to the ability of blockchain system block producers (including miners or validators) 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 the attacker, upon seeing a transaction about to be submitted to the blockchain, uses this information to insert their own transaction ahead of time, thereby gaining unfair advantage before price changes. 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, is still subject to debate within the blockchain community and the 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’ origins and ownership.
Throughout the process, ANTON and JAMES also conducted online searches on how to carry out the attack, methods to conceal their involvement in the attack, cryptocurrency exchanges with limited KYC procedures (for laundering their illicit proceeds), specialized attorneys for cryptocurrency cases, extradition procedures, and information related to the crimes charged in the indictment. These searches indicate their deliberate planning and execution of this attack.