Ethereum
DOJ accuses 2 of stealing ETH over $25 million via MEV exploit
The DOJ arrested and charged two individuals May 15 on an alleged $25 million MEV exploit that occurred on the Ethereum blockchain.
The defendants – brothers Anton and James Pepaire-Bueno – face three charges of conspiracy, wire fraud and money laundering, each carrying a potential sentence of 20 years.
Attack line
Defendants’ Plan Involved Multiple Ethereum-Focused Steps maximum extractable value (MEV) — specifically the MEV-Boost software that many Ethereum validators use to optimize transactions as researchers look for profitable arbitrage opportunities using MEV bots.
First, the defendants allegedly established Ethereum validators and concealed their identities through various tactics. After establishing the network, the defendants allegedly created a series of “bait” or test transactions to study the trading activities of the MEV bots.
Then, after months of planning, the defendants tricked the victim traders into making preliminary trades, tricking the victims into purchasing illiquid cryptocurrencies that were supposed to gain value as a result of the trade.
Later, during the transaction order, the defendants exploited a vulnerability to replace the lured transactions with falsified transactions, thereby blocking the victims’ final sale. The defendants kept the highly liquid stablecoins and cryptocurrencies that the victims had initially spent, thus completing the theft.
The defendants then allegedly laundered the funds using various methods.
Mixed response
The case is notable because it involves a new type of crypto crime.
U.S. Attorney for the Southern District of New York Damian Williams said the scheme “has never been charged before” and that it “exploited[ed] the very integrity of the Ethereum blockchain.
The case has drawn backlash from people who view the highly profitable uses of MEV bots, such as the transactions the defendants allegedly blocked, as a problem in itself.
Mohamed Fouda, AllianceDAO contributor and VoltCapital Venture partner said:
“When an MEV robot uses $25 [million] of stable coins to sandwich 8 different illiquid coin transactions, i.e. a [completely] an honest deal. …If you bait this MEV robot, then it’s a crime.
Fouda also claimed that the case inappropriately describes the duties of Ethereum Relays. He called it “a trap aimed at dragging every operator on Ethereum into a web of legal compliance requirements.”
Ryan Sean Adams de Bankless also rejected the distinction between the transactions, asking rhetorically:
“What is legal and what is illegal that gets you 20 years in prison?”
Other commentators objected to the alleged theft. Loring Harkness, Head of Sales at Brainbot, said:
“Stealing from thieves is still theft.”
CEHV partner Adam Cochran called the case a “much more obvious case of exploit” than has been widely reported.
Product Manager/Lead Owner of Metamask Taylor Monahan said:
“Yes, if you steal and launder $25 million, you should expect a long prison sentence…”
The DOJ has yet to prove its case in court.