Two brothers have been accused of stealing $25 million in cryptocurrency in just 12 seconds.
Anton Peraire-Bueno, 24, and James Pepaire-Bueno, 28, were indicted this week on fraud and conspiracy charges for allegedly attacking the Ethereum blockchain and stealing $25 million in cryptocurrency, according to the U.S. Attorney's Office for the Southern District of New York.
They were each charged with conspiracy to commit wire fraud, wire fraud, and conspiracy to commit money laundering in connection with an alleged "novel scheme" to obtain $25 million in cryptocurrency within just 12 seconds.
"As we allege, the defendants' scheme calls the very integrity of the blockchain into question. The brothers, who studied computer science and math at one of the most prestigious universities in the world, allegedly used their specialized skills and education to tamper with and manipulate the protocols relied upon by millions of Ethereum users across the globe," U.S. Attorney Damian Williams said in a statement.
"Once they put their plan into action, their heist only took 12 seconds to complete. This alleged scheme was novel and has never before been charged. But as the Indictment makes clear, no matter how sophisticated the fraud or how new the techniques used to accomplish it, the career prosecutors of this Office will be relentless in pursuing people who attack the integrity of all financial systems," Williams said.
"These brothers allegedly committed a first-of-its-kind manipulation of the Ethereum blockchain by fraudulently gaining access to pending transactions, altering the movement of the electronic currency, and ultimately stealing $25 million in cryptocurrency from their victims," said Thomas Fattorusso, the Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (IRS-CI).
"In this case, IRS-CI New York's Cyber Unit simply followed the money. Regardless of the complexity of the case, we continue to lead the effort in financial criminal investigations with cutting-edge technology and good-ole-fashioned investigative work, on and off the blockchain," Fattorusso said.
According to the indictment, the brothers used their specialized knowledge to "meticulously" plan the exploit for months. They were allegedly able to manipulate and tamper with the process that validates transactions and adds them to the blockchain, in order to fraudulently gain access to pending private transactions.
In addition to allegedly learning the trading behaviors of the victim traders they ultimately stole from, the brothers set up shell companies and multiple private cryptocurrency addresses and foreign cryptocurrency exchanges in an effort to conceal their identities and the stolen proceeds. After allegedly carrying out the exploit, the brothers moved the stolen cryptocurrency through a series of transactions to conceal the source and ownership of the funds.
Investigators say that throughout the planning, the brothers searched online for information about cryptocurrency exchanges with limited "know your customer" procedures and for attorneys with expertise in cryptocurrency cases, wire fraud cases, and extradition procedures.
"As alleged in today's indictment, the Peraire-Bueno brothers stole $25 million in Ethereum cryptocurrency through a technologically sophisticated, cutting-edge scheme they plotted for months and executed in seconds. Unfortunately for the defendants, their alleged crimes were no match for Department of Justice prosecutors and IRS agents, who unraveled this first-of-its kind wire fraud and money laundering scheme," said Deputy Attorney General Lisa Monaco.
The Pepaire-Bueno brothers each face up to 20 years in prison on each of their three charges.
-- with reporting by TMX
