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Anton Peraire-Bueno and James Peraire-Bueno, two siblings, have been indicted by U.S. authorities for orchestrating a deliberate attack on Ethereum trading bots, which had a significant impact on blockchain security. This well-planned crime spree took place last year and led to a thorough investigation that resulted in charges being filed by the Department of Justice on Wednesday.
The brothers are accused of wire fraud and conspiracy to launder money through cryptocurrencies. In just 12 seconds, their operation compromised the integrity of the Ethereum blockchain and managed to steal approximately $25 million in cryptocurrencies.
The recent arrest of the brothers in Massachusetts and New York is a major breakthrough in the case. The daring exploit took place in April 2023, when they targeted automated bots designed to exploit trading inefficiencies on the Ethereum network. These bots, driven by the concept of Maximum Extractable Value (MEV), take advantage of the time lag between transaction announcement and confirmation to make a profit.
Anton and James devised a deceptive plan by initiating eight rigged transactions that would attract the bots into a trap. They exploited a vulnerability in MEV-Boost software, which has now been fixed. Each trapped transaction coerced the bots into buying large volumes of illiquid cryptocurrencies using $25 million worth of stablecoins.
To avoid detection, the brothers concealed their identities by using shell companies and anonymous cryptocurrency addresses. After the attack, they meticulously moved the stolen cryptocurrency through multiple transactions to obscure its source and true ownership. Their preparation was extensive, as they researched know-your-customer (KYC) standards and extradition laws, anticipating potential charges and staying ahead of law enforcement.
Deputy Attorney General Lisa Monaco emphasized the technological sophistication and unprecedented nature of the scheme. The indictment provides a detailed account of the Ethereum blockchain operation, explaining the roles of validators and the mempool where transactions are confirmed. The MEV-boost software played a crucial role in assembling these transactions and optimizing trading strategies.
The brothers’ strategy involved creating 16 Ethereum validators to target and exploit three specific traders’ bots. They sent bait transactions to analyze the bots’ trading patterns and then directed them towards a validator under their control. Here, they tampered with the block transactions, replacing genuine transactions with deceptive ones and manipulating digital signatures.
As a result, the targeted bots ended up purchasing worthless cryptocurrencies in large quantities, believing they were acquiring valuable assets. This left the victim traders with significant losses, as they were unable to sell the devalued cryptocurrencies. The brothers then absconded with $25 million worth of more liquid assets like stablecoins.
The laundering of their ill-gotten gains was carefully planned. The brothers converted the stolen cryptocurrencies into DAI and then into USDC to further obscure their trail. Special Agent in Charge Thomas Fattorusso of the IRS Criminal Investigation New York Field Office highlighted this operation as a unique form of blockchain manipulation, requiring advanced knowledge of Ethereum’s inner workings and significant technical expertise.
