MIT Brothers Charged in $25 Million Ethereum Fraud Scheme

Two brothers with degrees from MIT are facing federal charges for allegedly stealing around $25 million from Ethereum traders through a sophisticated crypto manipulation scheme. Prosecutors claim James and Anton Peraire-Bueno exploited flaws in the Ethereum blockchain to hijack automated trading bots and divert profits to themselves.

Good to Know

• The alleged scheme targeted bots that profit from rapid trading sequences known as “sandwich” or “front-running” strategies.
• Prosecutors say Israeli firm Savannah Technologies lost $13 million in one attack.
• Both brothers have pleaded not guilty; the top charge carries up to 20 years in prison.

According to Bloomberg, the case centers on an incident involving Savannah Technologies, a lesser-known Israeli trading firm. Its CEO, David Yakira, is expected to testify that the brothers’ actions drained $13 million from the company’s automated bots.

What Did the Brothers Do?

Investigators say the brothers took advantage of the way Ethereum transactions are ordered on the blockchain. By studying how bots place trades, they allegedly created small, tempting transactions designed to attract the bots — then reordered the blockchain sequence to intercept and capture the profits before those trades settled.

The prosecution is framing the case as a clear act of theft. To show criminal intent, they plan to cite online searches found on Anton’s computer, including phrases like “prison or jail worse” and “where do criminals keep dollars.”

It Was Legal Arbitrage?

Defense attorneys argue that the brothers’ actions fell within the bounds of a largely unregulated crypto marketplace. They claim that automated trading bots themselves engage in similar behavior — exploiting timing gaps and price inefficiencies — and that the brothers simply outsmarted their competitors within an open system.

Both defendants maintain their innocence, asserting that the transactions were technically valid under Ethereum’s rules.