Crypto News – Observing the Legal Consequences of Engaging in MEV Exploit on Ethereum
Crypto News – On May 15, the Department of Justice (DOJ) detained and prosecuted two people in connection with a suspected $25 million MEV exploit on the Ethereum network. The three counts of conspiracy, wire fraud, and money laundering against the defendants, brothers Anton and James Pepaire-Bueno, carry a possible 20-year sentence apiece.
The defendants’ strategy consisted of multiple phases centered around the maximal extractable value (MEV) of Ethereum. Initially, the accused parties supposedly set up Ethereum validators while using different strategies to hide their identities. The defendants allegedly built several “bait” or test transactions after setting up the network in order to observe the trading activity of MEV bots.
This Case is a New Type of Fraud
The defendants then, following months of preparation, tricked victim traders into making front-run trades by offering them illiquid cryptocurrencies that were predicted to appreciate as a consequence of the deal. The defendants then took advantage of a weakness in transaction ordering to swap out luring transactions for modified transactions, preventing the victims’ ultimate sale. By keeping the highly liquid cryptocurrencies and stablecoins that the victims had initially spent, the defendants successfully completed the theft. Subsequently, the accused employed diverse techniques to purportedly launder the funds.
The case is noteworthy because it relates to a novel kind of cybercrime. Reactions to the case have also come from people who view extremely profitable usage of MEV bots as a separate problem, such as trades that defendants are said to have stopped.
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.
Mohamed Fouda, AllianceDAO Contributor and VoltCapital Venture Partner
FAQ
What is the Maximum Extractable Value?
When creating a new block, miners or validators can choose to include, reorder, or exclude transactions to achieve the maximum value known as the maximal extractable value (MEV).
What is the Role of the DOJ?
The administration of justice and enforcement of federal law in the United States are the responsibilities of the United States Department of Justice, commonly referred to as the Justice Department.
Can Crypto be Cyber Attacked?
Cyberattacks have been a recurring problem for the cryptocurrency sector, and most international regulators disapprove of cryptocurrencies due to extensive hacking.
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