Two MIT-educated brothers are standing trial in Manhattan federal court this week. James, 29, and Anton Peraire-Bueno, 25, face charges for allegedly stealing $25 million in cryptocurrency.
The case began with opening arguments on Wednesday, which brought intense scrutiny to the crypto world. Prosecutors allege the brothers exploited a flaw in the Ethereum blockchain.
According to a report from Bloomberg, they supposedly used their advanced coding skills to outsmart automated trading bots, manipulating Maximal Extractable Value (MEV) transactions. Experts have long called the practice of MEV the “Wild West of crypto.”
The prosecution noted that the Peraire-Bueno brothers found a specific weakness in the MEV Boost software. This open-source program is widely used by Ethereum operators to organize transactions on the network. The alleged $25 million theft was conducted by luring automated “sandwich attack” bots into performing bad trades.
Consequently, the brothers were able to reorder the blockchain transactions to secretly steal the profit from the bots. The largest alleged victim is Savannah Technologies, an Israeli crypto firm that claims its bots lost about $13 million.
The firm’s chief executive, David Yakira, is expected to give testimony for the prosecution during the trial. Meanwhile, the lawyers representing all parties have publicly declined to comment on these serious proceedings.
The brothers, however, have entered a plea of not guilty to all charges. They firmly maintain that their complex actions constitute fair and open competition within an unregulated market space.
The defense insists that the funds were simply “voluntarily traded away” by the victims’ automated programs. The government intends to present evidence of criminal intent, citing Anton’s online searches for phrases like “prison or jail worse.”
Judge Jessica Clarke has allowed the defense to call expert witnesses on the nuances of MEV. This is permitted as long as the experts do not attempt to “blame the victim” for their losses.
That said, this highly technical case has the entire industry watching closely, expecting the proceedings to establish a crucial legal boundary between clever trading strategies and criminal market manipulation.
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