The
DOJ
arrested
and
charged
two
individuals
on
May
15
over
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
with
a
potential
20-year
sentence.
Line
of
attack
The
defendants’
plan
involved
several
steps
focused
on
Ethereum’s
maximal
extractable
value
(MEV)
—
particularly
the
MEV-Boost
software
many
Ethereum
validators
use
to
optimize
transactions
as
searchers
seek
profitable
arbitration
opportunities
using
MEV
bots.
First,
the
defendants
allegedly
established
Ethereum
validators
and
concealed
their
identities
through
various
tactics.
After
establishing
the
network,
the
defendants
supposedly
created
a
series
of
“bait”
or
test
transactions
to
study
MEV
bots’
trading
activities.
Then,
after
months
of
planning,
the
defendants
lured
victim
traders
into
performing
front-run
trades,
enticing
the
victims
to
purchase
illiquid
cryptocurrencies
that
were
expected
to
gain
value
as
a
result
of
the
transaction.
Later,
during
transaction
ordering,
the
defendants
exploited
a
vulnerability
to
replace
the
lured
transactions
with
tampered
transactions,
thereby
blocking
the
victims’
final
sale.
The
defendants
kept
the
stablecoins
and
highly
liquid
cryptocurrencies
that
the
victims
originally
spent,
thereby
finalizing
the
theft.
The
defendants
then
allegedly
laundered
the
funds
through
various
methods.
Mixed
response
The
case
is
notable
as
it
concerns
a
new
type
of
crypto
crime.
US
Attorney
of
the
Southern
District
of
New
York
Damian
Williams
said
the
scheme
“has
never
been
charged
before”
and
said
it
“exploit[ed]
the
very
integrity
of
the
Ethereum
blockchain.”
The
case
has
attracted
backlash
from
individuals
who
consider
highly
profitable
uses
of
MEV
bots,
such
as
the
trades
that
the
defendants
allegedly
blocked,
to
be
an
issue
in
their
own
right.
AllianceDAO
Contributor
and
VoltCapital
Venture
Partner
Mohamed
Fouda
said:
“When
an
MEV
bot
uses
$25
[million]
of
stablecoins
to
sandwich
8
different
transactions
of
illiquid
coins,
that
is
a
[completely]
honest
business.
…If
you
bait
this
MEV
bot,
then
that’s
a
crime.”
Fouda
also
asserted
that
the
case
improperly
portrays
the
duties
of
Ethereum
relayers.
He
called
it
a
“trap
to
pull
every
operator
on
Ethereum
into
a
web
of
legal
compliance
requirements.”
Ryan
Sean
Adams
of
Bankless
likewise
dismissed
the
distinction
between
transactions,
rhetorically
asking:
“What’s
legal
MEV,
and
what’s
illegal
MEV
that
gets
you
20
years
in
jail?”
Other
commentators
opposed
the
alleged
theft.
Head
of
Commercial
at
Brainbot
Loring
Harkness
said:
“Stealing
from
thieves
is
still
theft.”
CEHV
partner
Adam
Cochran
called
the
case
a
“much
more
clear
case
of
exploit”
than
widely
reported.
Metamask
Lead
Product
Manager/Owner
Taylor
Monahan
said:
“Yes,
if
you
steal
and
launder
$25
million
dollars
you
should
expect
to
go
to
prison
for
a
long
time
…
“
The
DOJ
has
yet
to
prove
its
case
in
court.
Mentioned
in
this
article
Go to Source
Author: Mike Dalton
