Peraire-Bueno Brothers File Motion to Dismiss $25 Million Crypto Fraud Charges
On Friday, December 6, 2024, James and Anton Peraire-Bueno filed a motion in the U.S. District Court for the Southern District of New York to dismiss charges related to a $25 million cryptocurrency heist. The two brothers, who are alumni of the Massachusetts Institute of Technology (MIT), argue that the indictment against them is “far removed from the heartland of wire fraud,” asserting that their innovative trades do not constitute misrepresentations and that they were not aware their actions would be deemed unlawful.
The motion targets multiple charges, including wire fraud conspiracy, wire fraud, and money laundering conspiracy. The Peraire-Buenos contend that the prosecution’s case lacks fundamental characteristics of fraud, claiming that their activities on the Ethereum blockchain were within the parameters established by the system’s code. The indictment, issued in May, alleges that the brothers exploited automated trading bots by misleading them into trades and disrupting the validation process to divert funds for their own benefit.
In their motion, the brothers emphasized that prosecuting them for actions permitted by the code of a decentralized marketplace is unprecedented. They argue that the government’s assertion that their conduct contradicted the implied expectations of other users is insufficient for a fraud claim. They assert that the indictment does not specify any duty owed by Peraire-Buenos to the trading bots involved in the transactions.
The brothers further elaborate that the Ethereum network evolves through user-driven protocol updates, and the government has not established any fixed rules that they allegedly violated. They describe the indictment as an attempt by the U.S. government to regulate, through criminal charges, the interactions of users in a decentralized system that relies on economic incentives and consensus for behavior.
Additionally, the Peraire-Buenos argue that the alleged victims of their actions are not entirely innocent. They targeted trading bots programmed to execute “sandwich attacks,” a strategy that involves manipulating prices by executing transactions before and after a trader’s order. This method allows bots to profit by buying tokens at lower prices and reselling them at higher rates immediately after the trader’s transaction.
While some in the cryptocurrency community view sandwich attacks as potentially manipulative or criminal, the brothers note that the government has not taken action against the bots’ interventions in these trades. They find it peculiar that the first prosecution of this nature represents the interests of entities typically prosecuted for predatory behavior.
The brothers contend that prior to this case, the lack of government action against sandwich attacks indicated that such interventions were not considered inappropriate in decentralized exchanges. Their motion argues that they lacked fair notice about the legality of their activities and that the wire fraud statute is “unconstitutionally vague” in this context.
They assert that no Ethereum user would have predicted that thwarting a predatory bot’s market manipulation could lead to criminal charges. Although the brothers may have “lured” the bots into initial trades, they maintain that these transactions were conducted with Ethereum liquidity pools, where the bots received exactly what they bargained for.
The indictment received significant attention in May when the brothers allegedly funneled $25 million in just 12 seconds. Following the incident, victims and representatives from the Ethereum network requested the return of the funds. However, instead of complying, the Peraire-Buenos allegedly laundered the money through a company they established and various cryptocurrency addresses.
As part of their defense, the brothers are also seeking to have the money laundering charge dismissed, arguing that their trading activities did not constitute fraud. In the lead-up to their arrest, they reportedly searched online for information on computer fraud laws and U.S. extradition treaties.
Please contact BlockTribune for access to a copy of this filing.
