Crypto Sandwich Attack Case: MIT Brothers Who Profited $25 Million to Stand Trial

Original Article Title: MIT Grad Brothers' Trial Puts Focus on the 'Wild West of Crypto'

Original Article Author: Miles J. Herszenhorn, Bloomberg

Original Article Translation: Luffy, Foresight News

Two brothers recently graduated from MIT are facing trial this week. This case may unveil a secretive and controversial cryptocurrency trading strategy.

James Peraire-Bueno and Anton Peraire-Bueno are accused of stealing around $25 million from other traders on the Ethereum blockchain through a so-called 'sandwich attack.' The brothers have pleaded not guilty, arguing that their actions were within reasonable operation in an unregulated market, and the so-called victims were also engaging in similar trades.

Anton Peraire-Bueno (left) and James Peraire-Bueno (right) arrive at the New York Federal Court on Tuesday

This case has sparked division in the cryptocurrency community. Many are hoping that the trial set to begin on Wednesday in Manhattan Federal Court will clarify rules around the 'Maximal Extractable Value (MEV) strategy.' The MEV strategy involves reordering, excluding, or including transactions prior to on-chain execution.

"Honestly, I never thought this would be considered a crime," said Evan Van Ness, Chief Investment Officer of the cryptocurrency trading firm TXPool Capital, discussing the case against the brothers. "If people think the cryptocurrency space is the Wild West, then MEV is the Wild West of the crypto world."

While some MEV operations are seen as potentially improving cryptocurrency market efficiency, the sandwich attacks carried out by alleged victims like the Peraire-Bueno brothers are highly controversial. Attackers use bots to sandwich orders before and after other users' transactions: first driving up the price, then immediately selling to profit, with the cost borne by the user caught in the middle. Some view this behavior as market manipulation, but currently, it is not illegal.

Companies that carry out a sandwich attack typically operate in secrecy and often go to great lengths to conceal their identity. However, in the trial of the Peraire-Bueno brothers, one such company came to light. Court documents reveal that the two brothers' main alleged victim was Savannah Technologies—an obscure Israeli firm. The company's CEO, David Yakira, is expected to testify as a prosecution witness, confirming that the brothers launched an attack against Savannah's MEV bot, resulting in the company losing $13 million in proceeds.

The lawyers for the Peraire-Bueno brothers declined to comment; Yakira and Savannah Technologies' lawyers similarly refused to respond; the prosecutor also did not reply to requests for comment.

The prosecutor stated that James, 29, and Anton, 25, first studied the sandwich attacker's transaction behavior and then devised a trap plan. The sandwich attack perpetrators wrote a program for the bot to filter out profitable targets from pending transactions on the blockchain—usually large transactions or transactions involving low-liquidity tokens.

The prosecution alleges that the brothers executed the plan in April 2023: they initiated multiple small low-liquidity trades to attract the targeted bot. An expert hired by the defense mentioned in court documents that one bot, in order to front-run the Peraire-Bueno brothers on a trade worth less than $700, deployed nearly $5 million.

The prosecutor also pointed out that the brothers discovered a vulnerability in the MEV Boost code. MEV Boost is an open-source software primarily used by Ethereum network operators. The prosecution stated that leveraging this vulnerability, the Peraire-Bueno brothers were able to view the full contents of the proposed on-chain block and reorder it to seek an advantage—essentially selling the coins shortly after the sandwich attacked bot bought the low-liquidity cryptocurrency.

"The brothers essentially orchestrated a security sandwich attack that should have complied with network rules," said Matt Cutler, CEO of blockchain infrastructure company Blocknative Corp, "but due to this vulnerability, the attack was not secure."

Meanwhile, the defense argues that companies conducting sandwich attacks voluntarily engage in transactions, and ownership of the funds has transferred.

Defeating Bots: Modus Operandi Enhanced by Elite Tech

The prosecutor stated that the brothers learned the technical skills required to carry out the alleged fraud at "one of the most prestigious universities in the United States." Anton graduated from MIT in 2024 with a Bachelor's degree in Computer Science and Engineering; a few years earlier, James obtained Bachelor's and Master's degrees in Aeronautics and Astronautics from the same institution. An MIT spokesperson declined to comment on the case.

The prosecutor sought to characterize the case as a simple theft, directing the jury's attention to the two brothers' actions. To prove that the brothers had a criminal intent, the prosecution plans to point out that Anton had searched online for "which is worse, jail or prison" and "where do criminals usually hide money." The two face the most serious fraud charge, punishable by up to 20 years in prison.

Prior to the trial, the prosecution expressed a desire to minimize references to sandwich transactions. They requested that U.S. District Judge Jessica Clarke bar the two brothers from presenting expert testimony on sandwich transactions, arguing that "in any case, the brothers' behavior constitutes fraud" and that "excessive discussion of sandwich attacks may bias the jury against the prosecution's victims."

Last week, Clarke ruled that the Peraire-Bueno brothers could have most of their experts testify, provided they do not blame the victims.

It may be a delicate line to walk as the brothers seek to contextualize their actions within what their lawyers have termed a "high-risk adversarial context." In a recent court filing, they dismissed the prosecution's allegations of unlawful intent:

"A person trying to thwart a sandwich attack, defeat an MEV bot with the attacker's own tools, has reason to believe they did nothing wrong," the Peraire-Bueno brothers wrote in the filing.

A Highly Secretive World

Within the cryptocurrency community, some who find the accusations against the Peraire-Bueno brothers credible also acknowledge doubts about sandwich attacks.

"Even if you consider MEV searchers (i.e., sandwich attackers) to be malicious actors, you cannot therefore consider stealing their money to be justified," Ethereum Foundation researcher Dankrad Feist wrote on the X platform in May 2024, "Stealing a thief's money is still theft."

Feist stated on Tuesday that his views on the case have not changed since the publication of his article.

A report cited by both sides indicates that 75% of sandwich attacks can be traced back to just 20 accounts, but little is known about these accounts.

Savannah Technologies and Yakira also have low public profiles. According to Yakira's LinkedIn profile, he graduated from The Hebrew University of Jerusalem in 2015 and then pursued a Ph.D. in cryptography at the Israel Institute of Technology; from 2017 to 2020, he served as the research director at the Israeli cryptocurrency company Orbs.

Currently, the Peraire-Bueno brothers are accused of being the "beneficial owner of $12 million stolen from other traders," with the identity of the related trader still unknown.

"MEV is a highly secretive world," Cutler recalled during a cryptocurrency conference where "traders wore motorcycle helmets to conceal their identities." He noted that watching "how the judge and jury navigate the complex issues related to MEV in the case" will be quite interesting.

"At the very least, I will be closely monitoring the trial to see how the court's depth of consideration unfolds when contemplating future precedents," he said.

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