MIT Grads Face Trial Over Alleged $25M Crypto Hack

Two MIT-educated brothers are on trial in Manhattan, accused of orchestrating a sophisticated crypto heist that netted them $25 million in just 12 seconds. The alleged scheme targeted Ethereum's MEV-Boost protocol and "sandwich bots," using a vulnerability to drain funds from unsuspecting traders.

The 'Omakase' Plan

According to testimony from Travis Chen, a former employee of the Peraire-Bueno brothers' firm, the brothers meticulously planned the operation, dubbed "Omakase," for months. Chen, who received a non-prosecution agreement in exchange for his testimony and forfeiture of $2.4 million, claimed the plan involved manipulating Ethereum's MEV-Boost protocol to profit at the expense of sandwich bots. These bots typically exploit price movements by front-running and back-running pending trades, a strategy that was turned against them in this case.

How the Heist Allegedly Worked

The prosecution alleges the brothers became validators on the Ethereum blockchain and exploited a glitch that allowed them to view transaction data prematurely. This enabled them to restructure blocks to benefit themselves, effectively draining funds from sandwich traders.

Chen presented notes from a December 2022 meeting, highlighting the plan's potential scale: "Operation size is enormous … $6 million on the contract. Large end if you trap them all at once, and could be way higher."

The brothers allegedly spent months analyzing trading patterns to design eight "bait" transactions to lure in the sandwich bots. Once engaged, they exploited the vulnerability to siphon off their funds.

Aftermath and Legal Battles

Following the alleged exploit, the brothers reportedly searched online for information on "how to wash crypto" and "top crypto lawyers." The defense has attempted to exclude this search history, arguing it falls under privileged attorney consultations.

Flashbots, the creator of the MEV-Boost software, patched the vulnerability within 24 hours of the exploit. Robert Miller, a Flashbots developer, testified that the brothers contacted him anonymously afterward, offering details on a similar strategy in exchange for downplaying the incident as an "exploit."

The defense is challenging Chen's current views on the scheme, pointing out that he initially believed the alleged exploit was not illegal or wrongful. They argue that any post-indictment remorse is irrelevant to the brothers' beliefs at the time of the incident.

Key Takeaways:

• The trial highlights the potential risks associated with MEV (Miner Extractable Value) and the complex strategies employed in the crypto trading world.
• The case raises questions about the legality and ethics of exploiting vulnerabilities in blockchain protocols.
• The testimony reveals the intricate planning and execution required for sophisticated crypto heists.