A federal trial is underway in New York for two MIT graduates accused of a $25 million cryptocurrency theft, a case poised to set significant legal precedent for the controversial and largely unregulated practice of Maximal Extractable Value (MEV) in the digital asset market.
Brothers James Peraire-Bueno, 29, and Anton Peraire-Bueno, 25, are charged with exploiting a vulnerability in Ethereum’s blockchain to steal the funds in a 12-second operation in April 2023.
The U.S. Department of Justice has accused them of fraud, with potential sentences of up to 20 years in prison if convicted.
The defense, however, argues that the brothers’ actions were legitimate within the nascent and unregulated cryptocurrency environment. Their lawyers contend the defendants merely “outsmarted” predatory bots that were themselves engaged in questionable “sandwich attack” tactics.
This dispute highlights the legal “gray area” surrounding MEV, a practice where automated bots reorder, insert, or censor transactions to maximize profit. While some see MEV as a tool for market efficiency, others view it as a form of manipulation.
Prosecutors allege the MIT-trained brothers identified a flaw in the widely used MEV Boost software. They reportedly reordered transactions within a block, selling illiquid cryptocurrencies to unsuspecting bots at inflated prices.
The primary victim, according to court documents, was Israeli firm Savannah Technologies, which lost $13 million. Its CEO, crypto expert David Yakira, is expected to testify against the brothers. An additional $12 million was reportedly taken from unidentified traders.
Prosecutors have cited Anton Peraire-Bueno’s web searches for terms like “is prison worse than jail?” and “where do criminals keep dollars?” as evidence of premeditation and criminal intent.
The brothers have pleaded not guilty. U.S. District Judge Jessica Clarke has allowed the defense to present expert testimony explaining sandwich attacks but has prohibited any attempts to “blame the victim.”
An expert for the defense noted in a court document that one bot spent nearly $5 million attempting to “sandwich” a transaction by the brothers valued at less than $700.
Industry figures offer mixed views on the legality and ethics of such practices. Evan Van Ness, CIO of TXPool Capital, expressed surprise at the criminalization of the brothers’ actions, stating it “didn’t even occur to him” that they could be illegal.
Matt Cutler, CEO of Blocknative Corp, described the brothers’ act as exploiting a flaw to trick bots, an action he deemed questionable but technically within the network’s rules.
Conversely, Dankrad Feist, a researcher at the Ethereum Foundation, maintained that “stealing from a thief is still stealing,” underscoring the need for clear ethical boundaries.
Slava Demchuk, CEO of AMLBot, acknowledged that the lack of regulation in the crypto space complicates matters, stating, “It’s quite a gray area and the jury will evaluate it.”
The trial’s outcome could significantly impact how similar activities are prosecuted and regulated, potentially setting a benchmark for future legal interpretations in the volatile world of cryptocurrency trading.