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Will Walden. Two brothers, both former
students at the Massachusetts Institute of Technology, or MIT,
have been charged with stealing $25 million in cryptocurrency by
exploiting a vulnerability in the Ethereum blockchain.
The US Department of Justice, or the DOJ, unsealed the indictment
on Wednesday, revealing the rapid execution of the scheme.
That took. Just 12 seconds.
US Attorney Damian Williams stated that the scheme was so
sophisticated that it calls the very integrity of the blockchain
into question. He emphasized that the brothers,
using their advanced education and computer science and
mathematics, managed to manipulate the Ethereum
blockchain protocols impacting millions of users worldwide.
Oh, the accused, Anton Bueno and James Bueno, were arrested on
Tuesday as 24 and 28, respectively, and they face
charges including conspiracy to commit wire fraud, wire fraud,
and conspiracy to commit money laundering.
And if convicted, each brother could face up to 20 years in
prison for each count. The indictment details that the
alleged scheme began in December 2022.
After months of planning, the brothers allegedly used their
expertise to gain unauthorized access to quote pending private
transactions on the Ethereum blockchain, manipulating these
transactions to steal cryptocurrency from their
victims. And according to the Department
of Justice, the brothers exploited a window of
vulnerability in the blockchain that exists between the
initiation of a transaction and its addition to the blockchain.
This period involves the structuring of transactions into
proposed blocks, which are then validated and added to the
blockchain. And the brothers allegedly set
up a network of Ethereum validators using shell companies
and foreign exchanges to conceal their identities.
This allowed them to manipulate the transaction process,
reordering blocks to their advantage and recapturing the
cryptocurrency intended for others.
And when victims realized their funds have been stolen, they
requested returns. But the brothers reportedly
refused and took steps to hide their illicit gains.
This included creating shell companies and using private
cryptocurrency addresses and foreign exchanges that lack
stringent Know Your Customer Procedures, or KYC.
Their online search history indicated extensive research
into the methods and risks associated with their scheme.
They search for terms such as how to wash crypto exchanges
with no KYC, top crypto lawyers, money laundering, statute of
limitations, and does the United States extradite to quote
foreign countries. Now the scheme was uncovered by
investigators who traced the financial transactions.
Thomas Fetterusso, Special Agent in Charge of the IRS New York
Field Office, highlighted the role of both advanced technology
and traditional investigative methods in cracking this case.
The indictments time coincides with the SE CS review of an
Ethereum exchange trading fund or ETF.
The alleged fund could impact the SE CS decision with chair
Gary Gensler expressing concerns about investor protection in the
volatile cryptocurrency market. Now, Deputy Attorney General
Lisa Monaco described the theft as a technologically
sophisticated cutting edge scheme that the brothers
executed swiftly after meticulous planning, and the IRS
played a crucial role in unraveling this complex fraud.
The prosecutors allege that the brothers use their specialized
skills, their education at MIT, to exploit Ethereum's
transaction validation process. This process involves
structuring pending transactions into blocks and then validating
them, with the brothers, manipulating them for their own
benefit. And the DOJ claims that the
brothers actions exploited the system's vulnerabilities to gain
unauthorized access and alter transactions.
Stealing cryptocurrency. During the brief window before
transactions were permanently recorded on the blockchain,
about 12 seconds altogether. To steal all this money and when
confronted, the brothers allegedly took extensive
measures to launder the stolen funds and cover their tracks.
This included setting up multiple private cryptocurrency
addresses and using foreign exchanges without KYC protocols
to obscure the trail of their illicit activities.
And the brothers efforts to hide their activities involved
detailed preparations. To evade legal repercussions,
they searched for legal advice and information on jurisdictions
without extradition treaties with the US, demonstrating their
awareness of their potential legal consequences.
And this indictment calls for the seizure of several bank
accounts and personal property linked to the brothers,
underscoring the scale of their alleged financial maneuvers
designed to conceal their identities in the ownership of
these stolen funds. And the DOJ's allegations for
the first criminal charges of this kind mark a significant
development in the enforcement of cryptocurrency regulations.
The schemes, unprecedented in nature, underscores the
challenges faced by authorities in policing the rapidly evolving
digital currency space. This case, unfolding against the
backdrop of the SC, CS considerations on Ethereum ETFs,
emphasizes an ongoing need for robust regulatory frameworks to
protect investors and maintain the integrity of blockchain
technologies. So these two educated brothers
face severe legal consequences for allegedly orchestrating a
rapid and sophisticated cryptocurrency heist exploiting
the Ethereum blockchain. The case is significant because
it has concerns about blockchain security and the need for
stringent regulatory measures in the cryptocurrency industry.
If you can steal this much in 12 seconds, well, you could steal
anything in a little bit more time.
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