Cryptocurrency: American Brothers Arrested For Stealing $25 Million In 12 Seconds
An indictment was unsealed today charging Anton Peraire-Bueno, 24, of Boston, and James Pepaire-Bueno, 28, of New York, with conspiracy to commit wire fraud, wire fraud, and conspiracy to commit money laundering.
The charges in the indictment arise from an alleged novel scheme by the defendants to exploit the very integrity of the Ethereum blockchain to fraudulently obtain approximately $25 million worth of cryptocurrency within approximately 12 seconds.
Anton Peraire-Bueno and James Peraire-Bueno were arrested yesterday in Boston and New York, respectively, and will be presented this afternoon before U.S. Magistrate Judge Paul G. Levenson for the District of Massachusetts and U.S. Magistrate Judge Valerie Figueredo for the Southern District of New York.
“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,” said Deputy Attorney General Lisa Monaco.
“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. As cryptocurrency markets continue to evolve, the Department will continue to root out fraud, support victims, and restore confidence to thes markets.”
“Today, my office indicted two brothers — Anton Peraire-Bueno and James Peraire-Bueno — for conspiracy to commit wire fraud, wire fraud, and conspiracy to commit money laundering, all stemming from their alleged scheme to exploit the Ethereum blockchain and to obtain about $25 million worth of cryptocurrency from it,” said U.S. Attorney Damian Williams for the Southern District of New York.
“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. And 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.”
“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 Special Agent in Charge Thomas Fattorusso of the IRS Criminal Investigation (IRS-CI) New York Field Office. “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.”
As alleged in the indictment, Anton Peraire-Bueno and James Pepaire-Bueno are brothers who studied mathematics and computer science at one of the most prestigious universities in the country.
Using the specialized skills developed during their education, as well as their expertise in cryptocurrency trading, Anton Peraire-Bueno and James Pepaire-Bueno exploited the very integrity of the Ethereum blockchain in order to fraudulently obtain approximately $25 million worth of cryptocurrency from victim cryptocurrency traders (the “Exploit”).
Through the Exploit, which is believed to be the very first of its kind, Anton Peraire-Bueno and James Pepaire-Bueno manipulated and tampered with the process and protocols by which transactions are validated and added to the Ethereum blockchain.
In doing so, they fraudulently gained access to pending private transactions and used that access to alter certain transactions and obtain their victims’ cryptocurrency. Once the defendants stole their victims’ cryptocurrency, they rejected requests to return the stolen cryptocurrency and took numerous steps to hide their ill-gotten gains.
Anton Peraire-Bueno and James Pepaire-Bueno meticulously planned the Exploit over the course of several months. Among other things, they learned the trading behaviors of the victim traders whose cryptocurrency they ultimately stole.
As they planned the Exploit, they also took numerous steps to conceal their identities and lay the groundwork to conceal the stolen proceeds, including by setting up shell companies and using multiple private cryptocurrency addresses and foreign cryptocurrency exchanges.
After the Exploit, the defendants transferred the stolen cryptocurrency through a series of transactions designed to conceal the source and ownership of the stolen funds.
Throughout the planning, execution, and aftermath of the Exploit, Anton Peraire-Bueno and James Pepaire-Bueno also searched online for information about, among other things, how to carry out the Exploit, ways to conceal their involvement in the Exploit, cryptocurrency exchanges with limited “know your customer” procedures that they could use to launder their criminal proceeds, attorneys with expertise in cryptocurrency cases, extradition procedures, and the very crimes charged in the indictment.
If convicted, Anton Peraire-Bueno and James Pepaire-Bueno each face a maximum penalty of 20 years in prison for each count.
IRS-CI New York’s Cyber Investigations Unit investigated the case, with the assistance of the U.S. Customs and Border Protection and New York City Police Department.
Assistant U.S. Attorneys Rushmi Bhaskaran and Danielle Kudla for the Southern District of New York are prosecuting the case.
An indictment is merely an allegation. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
