Federal prosecutors have charged two MIT-educated brothers with orchestrating a lightning-fast cryptocurrency theft, accusing them of exploiting the Ethereum network to steal $25 million within seconds, a scheme authority is calling unprecedented in digital finance.
The brothers, however, claim they did nothing illegal. Their defense argues that no fraud occurred as they merely outsmarted “predatory” automated trading bots. In their view, it was a clever move in the cutthroat, Wild West world of crypto trading, not a crime.
That’s the argument defense lawyers for Anton Peraire-Bueno, 25, and James Peraire-Bueno, 29, are expected to make when their trial opens in Manhattan federal court on Tuesday.
If found guilty of the charges of conspiracy, wire fraud, and money laundering, the brothers, both trained in mathematics and computer science, could face up to 20 years in prison on each count. The trial unfolds as the Trump administration pushes to tighten oversight of the cryptocurrency industry through new regulations.
Prosecutors allege the brothers spent months preparing for the heist, executing a 12-second exploit on the Ethereum blockchain in April 2023. They claim the scheme was carefully planned, citing online searches the two allegedly made for “how to wash crypto” and “top crypto lawyers.”
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At one point, prosecutors say, the brothers even searched for “Money launder statue of limitations,” mistakenly spelling “statute” as “statue.”
According to prosecutors, the brothers set up “bait transactions” to identify three target traders and analyze how their bots operated. Once they had enough information, they “lured” the bots into a swift and precisely timed trap.
Prosecutors say the brothers created an enticing package of crypto trades, the kind they knew the victims’ bots wouldn’t be able to resist. Once the bots took the bait, the brothers allegedly triggered the trap, exploiting a software “vulnerability” that allowed them to see private transaction data and “tamper” with the trades in a bait-and-switch move. Instead of the profits they expected, the victims discovered their $25 million had been funneled into a batch of nearly worthless, illiquid tokens.
Prosecutors allege the brothers concealed their identities and the whereabouts of the stolen funds by routing them through shell companies, multiple crypto wallets, and overseas exchanges. The entire theft, they say, unfolded in just 12 seconds during the narrow window between when a crypto trade is initiated and when it becomes permanently recorded on the blockchain.
“Using the specialized skills developed during their education, as well as their expertise in cryptocurrency trading,” the brothers “exploited the very integrity of the Ethereum blockchain,” prosecutors said in a 19-page indictment.
It alleges that “manipulated and tampered with the process and protocols by which transactions are validated and added to the Ethereum blockchain.”
“In doing so, they fraudulently gained access to pending private transactions and used that access to alter transactions and obtain their victims’ cryptocurrency.”
At a hearing on Thursday, prosecutors said the brothers’ legal team has made it clear they have no intention of negotiating a plea deal.
Instead, the defense plans to vigorously challenge the prosecutors’ claims during the trial in front of a jury.
During oral arguments in June, Patrick Looby, attorney for the older brother James, told U.S. District Court Judge Jessica G. L. Clarke that “there’s no central authority” overseeing the Ethereum blockchain.
“And there’s no government regulations. Instead, economic incentives guide parties’ behavior,” Looby argued.
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Earlier this year, in a bid to dismiss the indictment, the defense attorneys argued that the alleged victims lost their cryptocurrency “through pre-programmed trades without ever interacting with the Peraire-Buenos, directly or indirectly.”
“Before this indictment, no Ethereum user would have understood that thwarting a predatory attempt by ‘bots’ engaged in market manipulation could lead to criminal charges,” they wrote, as quoted by BI.
“No court has ever applied these statutes to similar transactions,” they argued. “And the Peraire-Buenos had no reason to know that their alleged conduct may be considered unlawful.”