June 23, 2024

MIT-Educated Brothers Charged in $25 Million Ethereum Heist

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Anton Peraire-Bueno, 24, and James Peraire-Bueno, 28, have been charged with wire fraud and money laundering in what the U.S. Department of Justice (DOJ) describes as the first heist of its kind. The brothers, educated at the prestigious Massachusetts Institute of Technology (MIT), allegedly orchestrated a technologically sophisticated scheme to steal $25 million in Ethereum cryptocurrency in April 2023.

“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,” stated Deputy Attorney General Lisa Monaco. She emphasized that the Internal Revenue Service (IRS) played a crucial role in unraveling this unprecedented wire fraud and money laundering scheme.

According to prosecutors, the brothers utilized highly specialized skills acquired from their education at MIT to exploit Ethereum’s transaction validation process. The indictment details that Anton and James studied mathematics and computer science, which equipped them with the expertise to carry out this intricate fraud.

“The defendants’ scheme calls the very integrity of the blockchain into question,” noted U.S. Attorney Damian Williams, referring to the public ledger that records cryptocurrency transactions.

The brothers allegedly manipulated Ethereum traders by fraudulently accessing and altering pending private transactions to acquire their victims’ cryptocurrency. This swift operation, known as “the Exploit,” was executed in mere seconds, demonstrating the brothers’ advanced technical capabilities.

Prosecutors explained that the scheme involved setting up a series of Ethereum validators to build blocks on the blockchain. They targeted three traders who operated Maximal Extractable Value (MEV) bots for arbitrage trading. The brothers tested bait transactions to understand the arbitrageurs’ strategies. Once selected to validate a new block, they proposed transactions that the arbitrageurs would likely front-run.

The Peraire-Buenos exploited a bug in Ethereum to tamper with the proposed block. They allowed the traders to complete their buy transactions and then replaced their own buy orders with sell orders for the same illiquid cryptocurrencies. This manipulation resulted in the arbitrageurs buying the tokens at inflated prices, netting the brothers $25 million.

Investigators noted that the brothers took steps to launder their illicit gains. When approached by an Ethereum representative, they declined to return the stolen funds. Anton Peraire-Bueno conducted online searches for cryptocurrency exchanges with minimal ‘know your customer’ protocols and methods for laundering cryptocurrency. James Peraire-Bueno searched for terms like ‘money laundering,’ ‘exploit,’ ‘computer fraud abuse act,’ and ‘does the United States extradite to [foreign country],’ indicating a guilty conscience.

The DOJ emphasized that this is the first instance where such a novel form of cryptocurrency fraud has been subjected to criminal charges. If found guilty, Anton and James Peraire-Bueno each face over 20 years in prison.

This case highlights the evolving nature of financial crimes in the digital age and raises significant concerns about the security of blockchain technologies. The outcome of this trial could set important precedents for handling similar cases in the future and influence measures to safeguard cryptocurrency transactions.

Terry Jones
Digital Assets Desk

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