Is Ethereum MEV robot money laundering? U.S. court hears case of MIT brothers for first time, 25 million mg of sandwich arbitrage involves fraud
MIT brothers are accused of exploiting Ethereum's MEV vulnerability to steal $25 million. The New York court's hearing of the case will draw a critical watershed for "code is law."
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Contents of this article
This Wednesday, the New York Federal Court in the United States opened a hearing on the first-ever on-chain lawsuit: from MIT Anton and James Peraire-Bueno were accused of transferring approximately $25 million in just 12 seconds through the Ethereum MEV bot vulnerability in April 2023. The prosecution called the incident a "high-speed bait and switch," while the defense countered that it was just a sophisticated arbitrage strategy common on Ethereum. Once the case is opened, it will not only affect the freedom of the two engineers, but will also test the long-held belief that "code is law" in the DeFi world.
The core charges surfaced
According to court records, prosecutors charged the two brothers with felony conspiracy to commit wire fraud, money laundering, and receiving stolen property. It was alleged that the two spent months studying the weaknesses of the MEV Boost software. After locking the opponent's robot, they first collected data by detecting transactions, then set up bait, and finally completed the transfer during the block sorting stage. The prosecutor emphasized that although the victim was another automated program, the nature of his behavior went beyond simple arbitrage and constituted deliberate fraud. If convicted, he may be sentenced to more than 20 years in prison.
The defense lawyers pointed out that the two brothers paid $6 million in taxes to the IRS to prove that the funds were not concealed. They argued that all operations complied with the rules of the Ethereum protocol and no unauthorized modifications were made to the data on the chain. Therefore, it should be regarded as reasonable market behavior and not a crime.
The fuzzy edges of MEV behavior
Maximum Extractable Value (MEV) is the space for block producers to make additional profits by changing the order of transactions. Common techniques include front-running, arbitrage and sandwich attacks. The community has long been divided on MEV: some believe that high-frequency arbitrage can improve liquidity, while others worry that predatory algorithms will erode user trust.
The special point of this case is that the focus of the accusation turned to a "premeditated and targeted" on-chain attack. The three-stage process proposed by the prosecutor showed the complexity of the behavior and tried to show that the incident had become a man-made manipulation and went beyond the scope of discussion of market efficiency and market mechanisms.
Reflections on "Code is not law"
After the incident, community opinions quickly divided. Evan Van Ness, chief investment officer of TXPool Capital, described this behavior as "all is fair in love and MEV", implying that the market inherently allows the strong to intervene in the trading arrangements of the weak. However, Ethereum Foundation researcher Dankrad Feist responded on the social platform:
"Program code is not law."
Feist pointed out that even if the system does not require permission, malicious use of software vulnerabilities to profit may still violate common law. This statement is equivalent to bringing the discussion back to traditional judicial standards: as long as the intention to manipulate and the facts of victimization are clear, on-chain execution cannot escape legal constraints.
Possible precedent effect
Observers expect that the judgment will be the first to The judicial definition of the behavior may rewrite the defi and Ethereum ecology, and the subsequent impact is reflected in at least three aspects: First, PoS public chain (such as Ethereum) node operators and MEV software practitioners who retain MEV issues may face legal disputes, resulting in scale and business adjustments; second, protocols designed through the potential behavior of MEV, such as DEX automatic arbitrage and path rearrangement, may face customer loss and legal costs, because "happening on the chain" no longer equals compliance. Third, regulators may use this case as a basis to establish new guidelines for decentralized finance, covering money laundering prevention and consumer protection.
Whether the final verdict is acquittal or conviction, this New York lawsuit will become a milestone in the history of blockchain. It forces developers, investors and regulators to regard MEV as a problem and consider possible future legal compliance costs in various countries. If there is a little carelessness, public chains with PoS as the core mechanism such as Ethereum are likely to face huge regulatory challenges.
