The Justice Department arrested and charged two people ethereum-blockchain-and-stealing-25m-cryptocurrency”>15 th of May regarding an alleged $25 million MEV exploit that occurred on the ethereum blockchain.
The defendants, brothers Anton and James Pepaire-Bueno, face three counts of conspiracy, wire fraud and money laundering, each with a possible sentence of 20 years.
Atack line
The defendants' scheme involved several steps focused on ethereum's maximum extractable value (MEV), particularly the MEV-Boost software that many ethereum validators use to optimize transactions while seekers search for profitable arbitrage opportunities using MEV robots.
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 robots.
Then, after months of planning, the defendants lured the victim traders into early trading, enticing the victims to purchase illiquid cryptocurrencies that were expected to gain value as a result of the transaction.
Later, during transaction sorting, the defendants exploited a vulnerability to replace the deceived transactions with manipulated transactions, thus blocking the victims' final sale. The defendants kept the stablecoins and highly liquid cryptocurrencies that the victims originally spent, thus ending the theft.
The defendants then allegedly laundered the funds through various methods.
Mixed response
The case is notable because it is a new type of cryptocrime.
U.S. Attorney for the Southern District of New York Damian Williams said the scheme had “never been charged before” and said it “exploited the very integrity of the ethereum blockchain.”
The case has sparked backlash from people who see the highly profitable uses of MEV robots, such as the trades the defendants allegedly blocked, as a problem in and of themselves.
Mohamed Fouda, AllianceDAO contributor and VoltCapital Venture partner twitter.com/MohamedFFouda/status/1790812568526704849″>saying:
“When an MEV robot uses $25 (million) of stablecoins to interleave 8 different illiquid coin transactions, that is a (completely) honest business. …If you provoke this MEV robot, then it is a crime.”
Fouda also claimed that the case incorrectly describes the duties of ethereum relays. He called it a “trap to drag all ethereum operators into a web of legal compliance requirements.”
Bankless' Ryan Sean Adams also dismissed the distinction between transactions, asking rhetorically:
“What is a legal MEV and what is an illegal MEV that sentences you to 20 years in prison?”
Other commenters took issue with the alleged theft. Brainbot Chief Commercial Officer Loring Harkness said:
“Stealing from thieves is still theft.”
Adam Cochran, a partner at CEHV, called the case “a much clearer case of exploitation” than was widely reported.
Metamask Owner and Senior Product Manager Taylor Monahan said:
“Yes, if you steal and launder 25 million dollars, you should expect to go to prison for a long time…”
The Justice Department has yet to prove its case in court.
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