Ethereum $25 million MEV scam declared invalid! Prosecutors overstepped authority, and the jury cried.

Two brothers who graduated from MIT are accused of exploiting a vulnerability in MEV-Boost to orchestrate a $25 million scam on Ethereum. The trial in the Manhattan federal court was declared a mistrial due to a deadlocked jury. Peter Van Valkenburgh, executive director of Coin Center, described the case as a “serious overreach” by prosecutors and submitted an amicus brief in support of the brothers.

MIT Brothers Profit $25 Million in 12 Seconds

Two brothers, MIT graduates, were charged by federal prosecutors with orchestrating an Ethereum scam involving up to $25 million. After four weeks of trial, the jury was unable to reach a consensus on how to apply the law, resulting in a mistrial. Anton (25) and James (29) Perel-Bueno were accused by the Southern District of New York of conspiracy to commit wire fraud, wire fraud, and conspiracy to commit money laundering. They allegedly exploited a software vulnerability in MEV-Boost to profit $25 million in just 12 seconds.

In April 2023, seven months after Ethereum’s transition to proof-of-stake (PoS) following the merge, the brothers allegedly exploited a vulnerability in the popular software MEV-Boost to deliberately “contaminate” a transaction block, allowing them to peek into other traders’ activities. Using this information, they performed “sandwich attacks” by front-running other traders’ transactions to inflate token prices and then selling at higher prices for profit. In just 12 seconds, they made $25 million.

Sandwich attacks are a common MEV strategy in DeFi. An attacker inserts a buy order before a victim’s transaction to push up the price, then sells immediately after the victim’s trade to profit. This strategy is technically feasible and difficult to prevent in Ethereum’s decentralized environment. The key controversy is whether this behavior should be viewed as clever arbitrage or as fraud.

The brothers argued that their actions were fair competition within Ethereum’s automated trading environment, especially involving MEV (maximal extractable value). Validators can profit by organizing transactions optimally before submitting blocks. Their defense hinges on the argument that Ethereum’s design permits such behavior, and they merely exploited opportunities within the protocol rules.

The Gray Area Between MEV Arbitrage and Fraud

However, Peter Van Valkenburgh, executive director of Coin Center, distinguished the brothers’ actions from other DeFi exploits (such as those involving Mango Markets manipulation by Avraham Eisenberg), arguing that in the adversarial world of block construction, validators need to optimize MEV. Van Valkenburgh told The Block that this case is a “serious overreach” by prosecutors.

“There’s almost no honor among validators,” Van Valkenburgh said. “As validators or MEV searchers, all you need to do is maximize your profit and include only profitable transactions.” This reflects a core principle of the crypto community: in permissionless networks, behavior that is not explicitly prohibited is considered permissible.

In his amicus brief to the court, Van Valkenburgh argued that if the prosecution succeeds, it would “significantly inhibit public participation” in permissionless networks. He also stated that the brothers “seem to have done nothing that clearly violates the rules or controls of the Ethereum protocol, and therefore should not be subject to external interference or enforcement.”

Core Dispute: MEV Arbitrage vs Fraud

Defense Perspective: Exploiting protocol-permitted mechanisms is fair competition and a form of technical innovation.

Prosecution Perspective: Deliberate deception and manipulation constitute wire fraud and money laundering.

Tech Community View: MEV extraction is part of Ethereum’s design and should be addressed through technical solutions, not legal action.

Legal Perspective: Regardless of technical nuances, deceiving others and stealing funds is a crime.

“We want this neutral infrastructure because that’s where efficiency lies,” Van Valkenburgh said. “The beauty of this system is that we don’t have to rely on the good behavior of individuals or nations. But if we start prosecuting everyone involved in this neutral infrastructure, we lose that opportunity.” This touches on the core philosophy of blockchain: the value of decentralization lies in neutrality and permissionless participation, not moral judgments.

Jury’s Deadlock and Mistrial

(Source: Business Insider)

According to internal court reports from Business Insider, although the jurors understood the facts of the case, they were deadlocked on how to apply existing law. The Department of Justice described the case as an “unprecedented wire fraud and money laundering scheme.” Jurors reportedly broke down in tears and struggled to sleep after deliberations.

This is an extremely rare situation in legal history. Jurors typically disagree on factual matters—whether the defendant committed the acts charged. In this case, the facts are not disputed: the brothers did what the prosecution accused. Their disagreement centers on the law—whether such behavior constitutes a crime, and whether existing wire fraud statutes apply to MEV extraction on blockchain.

The jurors’ emotional breakdown highlights the complexity of the issue. They were asked to apply traditional legal concepts to a novel decentralized technology environment with no clear precedent. Some jurors may believe that, regardless of technology, deceiving and stealing from others is criminal. Others may argue that in Ethereum’s permissionless environment, exploiting protocol mechanisms for arbitrage should not be criminalized.

Judge Jessica G. Clarke indicated that even with more time, the jury would likely not reach a verdict, and thus declared a mistrial. This decision underscores the fundamental difficulty: how to fairly adjudicate cases where existing legal frameworks clash with emerging technology. With the mistrial, the brothers remain charged with three counts, and the future of the case will be decided by the Southern District of New York, which may choose to dismiss or refile charges.

Implications for Ethereum’s Neutrality and Permissionless Networks

Van Valkenburgh noted that if prosecutors decide to refile, it signals continued efforts by the Department of Justice to assert jurisdiction over blockchain networks—even under a government that claims to be more crypto-friendly. “If they double down (on a retrial), it seems to continue to suggest that, at least in the Southern District of New York, anything happening on a blockchain is within their jurisdiction,” he said. “They may awkwardly try to stretch existing criminal law to fit new facts.”

This case has profound implications for the Ethereum ecosystem. If the prosecution’s logic holds, any validator or searcher performing MEV extraction on Ethereum could face criminal charges. This would severely discourage public participation in permissionless networks, as no one would want to risk legal repercussions while innovating.

One of Ethereum’s core values is permissionless access: anyone can participate without approval from central authorities. This openness fuels innovation but also invites regulatory challenges. Heavy legal intervention could undermine this neutrality, turning Ethereum into a permissioned network.