Key Takeaways

• In 2024, Anton and James Peraire-Bueno were indicted on fraud charges over a $25 million Ethereum exploit.

• Using a validator they controlled, the brothers manipulated MEV bots.

• After three days of deliberation, a New York jury failed to reach a verdict, and the judge declared a mistrial.

A federal judge declared a mistrial on Friday, Nov. 8, in the case of two brothers charged with exploiting an Ethereum vulnerability to the tune of $25 million.

With the jury failing to reach a verdict, the fate of Anton and James Peraire-Bueno remains uncertain, as do important legal questions regarding the definition of fraud in an on-chain world.

Legal Questions Surround Ethereum MEV Hack

Executed in just 12 seconds in April 2023, the Peraire-Bueno’s exploit was unlike a typical cyber attack and had no precedent in fraud law.

The two Massachusetts Institute of Technology (MIT)-educated brothers didn’t breach any servers or steal passwords.

Neither did they mislead victims in the classic sense. Instead, they targeted so-called MEV (Maximum Extractable Value) bots.

In a statement following their arrest, U.S. Attorney Damian Williams said the attack “calls the very integrity of the blockchain into question.”

However, in their defense, the brothers claimed that the federal wire fraud statute was unconstitutionally vague when applied to their actions.

Their lawyers argued the statute fails to provide clear notice that manipulating a blockchain ordering mechanism was criminal.

$25 Million in 12 Seconds

Prosecutors allege that the exploit occurred in a flash, lasting just 12 seconds, and netted the brothers 4,200 ETH, worth approximately $25 million at the time.

The victims were independent MEV bot operators who deploy algorithms to front-run or arbitrage Ethereum transactions.

Using an Ethereum validator they controlled, the brothers lured MEV bots into posting illiquid token trades.

They then swapped the bait transactions with tampered ones, blocking the final purchase while keeping the tokens the bots originally spent.

Trial Ends in Hung Jury

During Peraire-Bueno’s trial in New York, the defense argued that although their exploit may have been manipulative or even immoral, it didn’t meet the legal definition of fraud under the charges brought against them.

At the end of a four-week trial, five men and seven women on the jury asked to end deliberations, having failed to reach a unanimous verdict after three days.

After they suffered “multiple nights of sleeplessness,” half of the jurors “spontaneously broke down in tears,” their request to Judge Jessica Clarke stated, according to Reuters.

The declaration of a mistrial means the prosecution has the option to retry the case.

However, the Justice Department under President Donald Trump is a different institution from the one that originally filed charges in 2024.

Notably, the agency has shifted its position on charging software developers, ending a Biden-era crackdown on alleged unregistered money transmitters.

It has also disbanded its main crypto crime investigation unit.

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