MEV Brothers Argue ₱1.49 billion ($25 million) Ethereum Exploit Was Legal After Mistrial
Two MIT-educated brothers are arguing their ₱1.49 billion ($25 million) Ethereum exploit was perfectly legal, citing a previous DeFi trader's acquittal as precedent. US District Judge Jessica Clarke declared a mistrial in November 2024 after a jury couldn't reach a verdict following three weeks of trial.
Key Takeaway
The case could set a precedent for whether exploiting DeFi design flaws is hacking or just clever trading.
Defense attorney Patrick Looby told a New York court Friday that the Peraire-Bueno brothers' ₱1.49 billion ($25 million) MEV scheme should be dismissed, pointing to Avraham Eisenberg's acquittal for a similar DeFi exploit. Eisenberg tricked Mango Markets into lending millions against worthless collateral by exploiting a design flaw—and walked free.
James and Anton Peraire-Bueno face wire fraud and money laundering charges after allegedly manipulating Ethereum's MEV-boost system in April 2023. Prosecutors say the brothers created bait transactions to trick MEV bots into buying ₱1.49 billion ($25 million) in illiquid crypto, then used an invalid signature to tamper with the block and flip the trade to a sell order. The bots got stuck with worthless tokens while the brothers pocketed ₱1.49 billion ($25 million) in stablecoins.
Assistant US Attorney Danielle Kudla pushed back hard during Friday's hearing, saying this case has always been about deception and misrepresentation on the blockchain. She noted MEV-boost had specifications designed to prevent validators from modifying blocks, and the bot owners would never have executed the trades if they knew what was coming.
The defense argues Ethereum and MEV-boost lack terms of service, making the conduct lawful under the network's rules that allow MEV activity. Judge Clarke asked whether the slashing penalty—Ethereum's mechanism for punishing misbehaving validators—operates like a rule. Looby said no, calling it merely a disincentive.
Crypto think tank Coin Center warned in a letter to the court that convicting the brothers would massively chill public participation in innovative systems. The DeFi Education Fund submitted a similar letter arguing for acquittal, calling the prosecution a radical attempt to impose a novel code of conduct on Ethereum validators. Judge Clarke will not schedule a new trial until ruling on the motion to dismiss, with any potential retrial starting no earlier than November 2025.
This article was written based on reporting from Dlnews.
