DOJ charges MIT brothers with $25 million crypto theft

DOJ charges MIT brothers with $25 million crypto theft

The Justice Department on Wednesday announced charges against two brothers who graduated from the Massachusetts Institute of Technology for allegedly stealing $25 million worth of cryptocurrencies in about 12 seconds.

The Justice Department said the brothers – James Peraire-Bueno and Anton Peraire-Bueno – plotted the “first of its kind” crypto fraud involving the Ethereum blockchain over several months.

Her father is Jaime Peraire, H.N. Slater Professor of Aeronautics and Astronautics at MIT and former head of the university’s Department of Aeronautics and Astronautics.

“We’re in shock, we don’t even know what’s going on,” Jaime Peraire told CNBC when contacted at his home in Massachusetts and asked about the arrests of 28-year-old James and 24-year-old Anton.

Peraire declined further comment.

Prosecutors said the Peraire-Bueno brothers allegedly identified a vulnerability in the Ethereum blockchain that allows outsourced bots to identify the most valuable pending crypto transactions before adding them to the blockchain, the indictment said.

They then allegedly posed as the Ethereum validators using these bots and redirected the pending transactions to steal the $25 million, the indictment says. Foreign law enforcement authorities allegedly froze about $3 million of those funds, but the two men converted the unfrozen money into the DAI crypto token pegged to the U.S. dollar, the DOJ said.

The Peraire-Buenos also allegedly created shell companies using multiple private cryptocurrency addresses and foreign cryptocurrency exchanges hide their plan.

“The defendants’ scheme calls into question the integrity of the blockchain,” said Manhattan U.S. Attorney Damian Williams, whose office is prosecuting the two men.

“Once they put their plan into action, the heist only lasted 12 seconds,” Williams said. “This alleged scheme was new and has never been charged before.”

James, who lives in New York City, and Anton, who lives in Boston, were arrested Tuesday on charges of conspiracy to commit wire fraud, wire fraud and money laundering.

They appeared separately in federal courts in New York and Boston on Wednesday afternoon.

Judges set their bonds at $250,000 each, and each must secure two co-signers on their release bonds by May 29, according to a spokesman for the U.S. Attorney’s Office in Manhattan. They are also prohibited from trading cryptocurrencies, securities and raw materials.

If convicted, the brothers face a maximum sentence of 20 years in prison on each of the three counts.

Williams’ office said the Peraire-Bueno brothers studied mathematics and computer science “at one of the most prestigious universities in the country” and said their education helped them acquire the skills to carry out the alleged fraud.

According to an MIT spokeswoman, James Peraire-Bueno earned a Bachelor of Science in mathematics with computer science and in aerospace engineering from MIT in June 2019 and then earned a Master of Science in aerospace engineering from the school in June 2021.

During his college years, he was a member of the MIT sailing team.

Anton Peraire-Bueno earned his Bachelor of Science in computer science and engineering from MIT in February. He was a member of the university’s rowing team.

Anton’s LinkedIn page states that he worked as a cryptocurrency research intern at Polychain Capital in San Francisco for several months in 2021.

In 2020, Anton co-authored an academic paper on a machine learning model that could have “strong practical implications” for organizations “with large amounts of sensitive data,” according to a summary of that work.

Anton’s lawyers did not immediately respond to requests for comment. Court records do not indicate that any attorneys appeared on James’ behalf.

The charges come ahead of a long-awaited Securities and Exchange Commission decision expected later this month on approving an Ethereum exchange-traded fund.

This ETF would give investors access to the Ether token without having to own the cryptocurrency directly.

Bitcoin ETF issuers are already pessimistic about the chances that the SEC will approve an Ether ETF.

The DOJ’s announcement of the alleged fraud could increase skepticism as the SEC completes this review.

SEC Chairman Gary Gensler expressed concern about the lack of regulation in crypto markets, which could make listing dangerous for investors.

“For me, the fundamental question is: How do we ensure that the American investor is protected? And right now they’re not getting the disclosures that are required or needed,” Gensler said in an interview on CNBC’s “Squawk Box” earlier this month. .

“And the intermediaries at the center of this more centralized market are generally contradictory and do things that we would never allow the New York Stock Exchange to do,” he said.

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2024-05-15 23:30:16