Ethereum Exploit: How Two Brothers Stole $25 Million in Cryptocurrency

Last Updated on May 16, 2024

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Key Takeaways:

  • Landmark Legal Action: Anton Peraire-Bueno and James Pepaire-Bueno face charges including wire fraud and money laundering for manipulating Ethereum’s blockchain, leading to a $25 million theft.
  • Sophisticated Exploit: The brothers exploited the Ethereum blockchain’s transaction validation protocols, controlling and altering pending transactions to divert funds within 12 seconds.
  • Broader Implications: This incident challenges the perceived security of blockchain technology and coincides with an overall decrease in crypto-related thefts, as reported by CertiK.

In a landmark case, U.S. officials have charged Anton Peraire-Bueno and James Pepaire-Bueno with multiple counts, including wire fraud and money laundering, related to a sophisticated manipulation of the Ethereum blockchain.

This manipulation resulted in a theft of $25 million in cryptocurrency, challenging the security measures of the blockchain technology.

According to the U.S. Justice Department’s announcement on May 15, the brothers engaged in a first-ever scheme by exploiting the Ethereum blockchain’s transaction validation protocols.

This exploit allowed them to illicitly gain control over pending transactions, manipulate the transfer of electronic currency, and consequently steal $25 million from various victims—all within an astonishingly short time span of about 12 seconds.

Thomas Fattorusso, a special agent with the IRS Criminal Investigation’s New York Field Office, highlighted the unprecedented nature of the manipulation, stating, “These brothers allegedly committed a first-of-its-kind manipulation of the Ethereum blockchain by fraudulently gaining access to pending transactions, altering the movement of the electronic currency, and ultimately stealing $25 million in cryptocurrency from their victims.”

The technical method involved manipulating the ‘maximum extractable value‘ (MEV) on the Ethereum blockchain, using test transactions that forced the blockchain to prematurely release the contents of a proposed block, enabling them to divert the cryptocurrency.

Despite requests for the return of the stolen assets, the brothers reportedly moved the funds across various shell companies and foreign cryptocurrency exchanges, spreading the assets across multiple wallets in an effort to conceal their tracks.

If convicted, the brothers face up to 20 years in prison for each charge.

This case emerges amid reports from blockchain security platform CertiK, which noted that April saw victims lose about $25 million to crypto hacks, scams, and exploits—the lowest monthly total since 2021, even as over $1 billion has been siphoned off by illicit actors throughout the year.

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