MIT Brothers Accused in $25 Million Cryptocurrency Theft

A pair of MIT-educated brothers, 24-year-old Anton Peraire-Bueno and 28-year-old James Pepaire-Bueno, have been charged with conspiracy to commit wire fraud, wire fraud, and conspiracy to commit money laundering for allegedly stealing $25 million in a crypto trading scheme targeting Ethereum blockchain bots.

Brothers Face Charges in Sophisticated $25 Million Cryptocurrency Scheme

A federal indictment unsealed on Wednesday accuses two Massachusetts Institute of Technology (MIT)-educated brothers of orchestrating a novel and highly sophisticated scheme that exploited the vulnerabilities of automated trading bots on the Ethereum blockchain, resulting in the theft of approximately $25 million in cryptocurrency.

Twenty-four-year-old Anton Peraire-Bueno of Boston and his 28-year-old brother, James Pepaire-Bueno of New York, have been charged with conspiracy to commit wire fraud, wire fraud, and conspiracy to commit money laundering by prosecutors from the U.S. Attorney's Office for the Southern District of New York.

According to prosecutors, the defendants' actions have raised serious concerns about the integrity of the blockchain, a critical foundation of cryptocurrency technology. Damian Williams, the Southern District's U.S. Attorney, emphasized the unprecedented nature of the alleged scheme, describing it as "novel" and "never before charged."

The Peraire-Bueno brothers allegedly exploited a weakness in three traders' MEV bots, automated trading programs designed to scan the Ethereum blockchain for profitable opportunities and execute trades ahead of pending transactions. The brothers are also accused of exploiting a vulnerability in Flashbots, a software that conceals pending transactions on Ethereum to reduce the effectiveness of MEV bots.

Prosecutors allege that the brothers manipulated the traders' MEV bots into purchasing illiquid tokens worth $25 million. Utilizing the Flashbots vulnerability, the brothers subsequently altered the pending transactions to obtain the $25 million in stablecoins and other liquid tokens that the MEV bots had used to acquire the illiquid tokens.

The indictment states that the MEV bots, anticipating profits from the purchase of the illiquid tokens through immediate markup sales, were left holding worthless assets. Consequently, the traders' final sales could not be executed.

"The illiquid cryptocurrencies which the Victim Traders purchased in the frontrun transactions had been rendered effectively worthless," the indictment reads.

Allegedly, the brothers conducted extensive research in the months leading up to and following the scheme to evade detection and accountability. Their web search history reportedly included inquiries such as "how to wash crypto," "cefi exchanges with no kyc," "top crypto lawyers," and "wire fraud statute / wire fraud statute of limitations."

In a statement, Lisa Monaco, Deputy Attorney General, remarked that the Peraire-Bueno brothers "stole $25 million in Ethereum cryptocurrency through a technologically sophisticated, cutting-edge scheme they plotted for months and executed in seconds." She affirmed the Department of Justice's commitment to combating fraud and restoring confidence in cryptocurrency markets.

The brothers were apprehended on Tuesday and face a maximum sentence of 20 years in prison on each count if convicted.

Aleks Gilbert, DL News' New York-based DeFi correspondent, reported on the investigation.