Two MIT graduate brothers have been arrested and charged with exploiting a vulnerability in the Ethereum blockchain and stealing crypto worth $25 million in just 12 seconds. The indictment charges both brothers with wire fraud, conspiracy to commit wire fraud, and conspiracy to commit money laundering. The charges represent a significant action by the U.S. government related to the controversial practice of MEV,
or maximal extractable value. MEV allows operators of Ethereum and similar blockchains to preview upcoming transactions from users to earn extra profits. The government suggests in the indictment that the very existence of MEV illustrates the vulnerability of Ethereum itself.
According to the indictment, the Pepaire-Bueno brothers exploited MEV-boost, an MEV software used by most Ethereum validators.
They exploited a bug in MEV-boost's code that allowed them to preview block content before official delivery to validators. The indictment claims the brothers learned their victims' trading behaviors starting in December 2022 and took measures to hide their identities and the stolen proceeds. The indictment document claimed,
"The Victim Traders sold approximately $25 million of various stablecoins or other more liquid cryptocurrencies to purchase particularly illiquid cryptocurrencies. In effect, the Tampered Transactions drained the particular liquidity pools of all the cryptocurrency that the Victim Traders had deposited based on their frontrun trades."
The defendants allegedly laundered the funds through various addresses and sets of transactions, including converting the stolen funds
into DAI and then USDC.
