The Department of Justice has charged two people with the theft of more than $25 million in ETH through MEV exploits.
The DOJ arrested and charged two people on May 15 for the $25 million MEV exploit on the Ethereum blockchain.
The defendants, brothers Anton and James Pepaire-Bueno, were each charged with conspiracy, wire fraud and money laundering, which could result in up to 20 years in prison.
offensive line
The defendants’ scheme focuses on Ethereum’s Maximum Extractable Value (MEV), specifically the MEV-Boost software used by many Ethereum validators to optimize transactions as searchers use MEV bots to find profitable arbitration opportunities. Several customized steps were included.
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 activity of the MEV bots.
Then, after months of planning, the defendants lured victim traders into performing upfront transactions, leading victims to purchase illiquid cryptocurrencies with the expectation that they would gain value as a result of the transactions.
Later, during the transaction ordering process, the defendants took advantage of the vulnerability and replaced the lured transaction with a falsified transaction, blocking the victims’ final sales. The defendants completed the theft by storing the stablecoins and highly liquid cryptocurrencies that the victims had originally spent.
Afterwards, the defendants reportedly laundered money through various methods.
mixed reaction
This case is noteworthy because it concerns a new type of cryptocurrency crime.
Damian Williams, U.S. attorney for the Southern District of New York, said the scheme had “never been prosecuted before” and “exploited the integrity of the Ethereum blockchain.”
The incident has sparked a backlash from individuals who see the use of highly profitable MEV bots as a problem in their own right, such as the transactions the defendants allegedly blocked.
AllianceDAO Contributor and VoltCapital Venture Partner Mohamed Fouda said:
“The MEV bot sandwiching 8 trades in illiquid coins using $25 million in stablecoins is (completely) honest business. … If you use this MEV bot as bait, it is a crime.”
Fouda also argued that the incident inadequately portrays the duties of Ethereum intermediaries. He called it “a trap that will drag all operators of Ethereum into a web of legal compliance requirements.”
Ryan Sean Adams of Bankless similarly ignored the distinction between transactions and asked rhetorically:
“What is a legal MEV, and what is an illegal MEV that carries a 20-year prison sentence?”
Other commentators opposed the theft charge. Commercial Director at Brainbot Loring Harkness said:
“Stealing from a thief is still stealing.”
CEHV partner Adam Cochran called the case “a much clearer example of abuse” than has been widely reported.
Metamask Senior Product Manager/Owner Taylor Monahan said:
“Yes, if you stole and laundered $25 million, you should go to jail for a long time…”
The DOJ has yet to prove its claims in court.
