- Judge denies bid to throw out $25M MEV bot fraud charges; trial will take place in October
- Court: New blockchain exploits may still be a violation of wire fraud statute
- The result may be used as precedent in trying to prosecute other DeFi crimes
Two brothers, Anton and James Peraire-Bueno, will be tried as a judge denied their request to avoid charges related to a $25 million MEV bot exploit in the Ethereum network. The decision, which was issued by the US District Judge Jessica Clarke, highlights the clash between sophisticated blockchain strategies and conventional fraud-related laws since the court determined that novel and digital strategies do not evade the present-day US wire fraud statute.
Federal prosecutors believe that the pair of graduates of the Massachusetts Institute of Technology staged one of the most rapid blockbuster robberies in the crypto industry, plundering $25 million worth of digital currencies in less than 12 seconds. Their approach was to take advantage of the mechanics of maximal extractable value (MEV bots) which are used to extract the profit by reordering or adding blockchain transactions to get higher fees and arbitrage opportunities.
Four-Step Plan, High Stakes: The Next Blueprint of Crypto Fraud?
Court documents show the brothers carefully established a four-step process: bait, block, search and propagation. First, they examined the operation of bots by recognizing the placement of “bait” transactions and opening several validators on Ethereum with their own money. They created well-designed lure transactions when they were chosen to validate a block to attract MEV bots to run pre-programmed arbitrage bundles.
The brothers were able to get early access to the confidential contents of a proposed block by providing a manipulated signature, which enabled them to modify it before it was firmened on the blockchain. This action led to targeted bots investing large sums of money in illiquid cryptocurrencies that have been made worthless seconds later. These automated strategies had nearly $25 million in digital property stolen, which was redirected through a chain of shell accounts and exchanges that focused on privacy.
According to the bill of indictment, the hack is new and very technical. Regardless of how advanced or recent the fraud, the government argument, quoting court records, states that, “manipulating protocols in order to defraud users is a federal crime.”
Crypto Exploits, Old Laws: Legal Implications for Blockchain Innovators
The defense explained that Ethereum did not prescribe such actions and that such economic manipulations are technically allowed because of the transparency and open protocols on the network. The defense also argued that when MEV bots engage in such acts of aggressive front-running, they should not be treated with any legal leniency when it is done to them.
The court however held that the law does not permit the act of misrepresentation and defrauding of money even with the use of technical medium or invention of new methods. Assuming that the government is correct about allegations of crimes, the wire fraud statute gave defendants sufficient notice that their alleged actions constituted criminal offenses, even though the means by which they were committed was new or innovative, ruled Judge Clarke.
A single count, conspiracy to receive stolen property, was dismissed because of new DOJ policy narrowing the jurisdiction of prosecuting digital assets. Yet the main charges of wire fraud and money laundering stand. The brothers have been posted on bond of $250,000 and the trial will be held in October 2025. They would be subject to up to 20 years in prison per count in case of conviction.
Regulatory vigilantes believe that this will be a landmark case in the prosecution of blockchain fraud. Its precedent may set the tone of future prosecution of the most advanced blockchain hacks, affect the security policy of code and validators, and induce DeFi initiatives to develop tighter protections. The ruling can assist in determining the extent to which established laws can extend to the technical core of decentralized finance, as MEV practices increasingly enter crypto markets.
