MIT Brothers Must Face Trial for $25 Million MEV Bot Crypto Theft

Court Denies Motion to Dismiss Fraud Charges

Two MIT-educated brothers have failed to get fraud charges dismissed in connection with a $25 million cryptocurrency theft from the Ethereum blockchain. US District Judge Jessica Clarke denied a motion to dismiss by Anton and James Peraire-Bueno on Wednesday, stating the government adequately alleged their conduct met the criteria for fraud.

The federal government charged the pair in May 2024 with executing a fraudulent scheme, whereby they exploited a vulnerability on the Ethereum network to steal $25 million of cryptocurrency from victim traders.

First-of-Its-Kind MEV Bot Exploit

The brothers executed a first-of-its-kind exploit, netting the haul in just 12 seconds by allegedly using their computer science expertise to manipulate automated trading MEV bots. They accomplished this by luring the bots into trades and interfering with the validation process.

Judge Clarke noted that taking the government's allegations as true, the wire fraud statute provided defendants with adequate notice that their alleged conduct was criminal, despite any novel means used by the defendants.

Understanding MEV Bot Manipulation

MEV (maximal extractable value) bots are designed to front-run transactions in order to profit from higher fees for priority transactions. According to the indictment, MEV bots also scan the mempool for profitable arbitrage opportunities by exploiting price differences or predictable price movements based on pending transactions they can see in the mempool.

The indictment detailed how the brothers created a detailed four-step plan called "bait, block, search, and propagation." They established 16 Ethereum validators using 529.5 ETH to execute the scheme using lure transactions to attract the bots.

Defense Arguments Rejected

The brothers argued that the wire fraud statute did not provide fair notice that their conduct was criminal since their actions were permitted by the system's code. They also claimed they were unfairly targeted when their victims' trading bots allegedly engaged in manipulative trading themselves.

Prosecutors dropped one charge of conspiracy to receive stolen property after the brothers cited a Department of Justice memo about avoiding regulatory overreach on digital assets.

Trial Set for October 2025

In an August 2024 hearing, Judge Clarke ordered that Anton Peraire-Bueno and James Peraire-Bueno would stand trial in October 2025. That trial still stands now that the motion to dismiss has been denied, though the date was not confirmed in the ruling and the case is still in the pre-trial motions phase.

Serious Federal Charges Pending

The pair face charges of wire fraud, conspiracy to commit wire fraud, and conspiracy to commit money laundering. Federal wire fraud and money laundering charges typically carry significant prison sentences and fines.

This case represents a landmark prosecution in the cryptocurrency space, as authorities grapple with defining criminal conduct in the rapidly evolving world of blockchain technology and automated trading systems. The outcome could set important legal precedents for future cases involving MEV exploitation and cryptocurrency-related fraud.

For more Crypto, Web3, Blockchain & AI news visit : www.metamoonmedia.com