Federal prosecutors on Wednesday arrested two brothers, who had both studied at the Massachusetts Institute of Technology, on charges that they stole $25 million worth of cryptocurrency on Ethereum’s blockchain.
Anton Peraire-Bueno, 24, and James Peraire-Bueno, 28, were charged with conspiracy to commit wire fraud, wire fraud, and conspiracy to commit money laundering arising from allegations that they schemed to exploit a weakness in the Ethereum blockchain to steal $25 million worth of cryptocurrency in about 12 seconds. They are alleged to have used the skills they learned by studying computer science and mathematics at MIT to fraudulently access pending transactions on the Ethereum blockchain and manipulate the movement of the cryptocurrency.
The heist, which took place in April 2023, involved months of planning. The brothers allegedly studied the trading behaviors of the traders whose cryptocurrency they stole, set up shell companies to hide the funds, and transferred the funds through multiple transactions to hide their ownership. They also conducted online searches for things like how to steal cryptocurrency, how to hide their involvement in the fraud, cryptocurrency exchanges with limited “know your customer” procedures, lawyers who were experts in cryptocurrency cases, extradition procedures, and the crimes of wire fraud and money laundering.
Ethereum is a decentralized blockchain used for more than one million transactions on average per day. It is run as a decentralized network using “smart contracts,” which are self-executing computer protocols that facilitate transactions involving digital currency without a trusted intermediary. Transactions are recorded on a public ledger, or a “blockchain.” However, before transactions are added to the Ethereum blockchain, they are validated by “validators” who are randomly selected after depositing a certain amount of Ethereum cryptocurrency in a smart contract. Transactions await validation in a “memory pool.” After a transaction is posted to the blockchain, it cannot be altered or deleted.
Anton and James are alleged to have exploited a vulnerability in an open-source software, “MEV-Boost,” used to optimize the blockchain-building process for Ethereum validators, allowing them to tamper with Ethereum transactions.
The brothers also allegedly rejected requests to return the stolen funds and took steps to conceal their fraud.
According to the Department of Justice, this fraud is the first of its kind. If convicted, the brothers face up to 20 years in prison for each count.
Additional Reading
Two Brothers Arrested for Attacking Ethereum Blockchain and Stealing $25M in Cryptocurrency, U.S. Department of Justice (May 15, 2024)
US charges two brothers with novel $25 million cryptocurrency heist, Reuters (May 15, 2024)
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