US prosecutors are challenging the introduction of cryptocurrency policy arguments in the trial of two brothers accused of exploiting the Ethereum blockchain using maximal extractable value (MEV) bots. Anton and James Peraire-Bueno are accused of a $25 million MEV exploit that occurred in April 2023.
In a filing submitted on Tuesday to the U.S. District Court for the Southern District of New York, prosecutors opposed an amicus curiae brief, which was filed by Coin Center, a cryptocurrency advocacy organization. Amicus briefs are submitted by parties with an interest in a case, but who are not directly involved. The prosecutors argue that this brief could encourage the jury to acquit the Peraire-Bueno brothers.
The prosecution argues that Coin Center should direct its digital asset policy concerns to Congress rather than the courts. The filing stated that allowing such an amicus brief would allow the defendants to argue for nullification, which they deemed "lawless". They asserted that the court's sole concern should be whether a reasonable jury could find the defendants guilty based on the evidence presented at trial and that broader policy questions are not appropriate for this arena.
In response, the defense team stated that the Coin Center brief would offer a "unique perspective that will aid the Court" regarding the prosecutors' theory of the case. The defense argues that the government's theory could lead to federal criminal liability for any trading strategy that deviates from blockchain protocol specifications, given that Ethereum users are engaged in economic activity.
The trial of the Peraire-Bueno brothers is now in its eleventh day. The brothers face charges of wire fraud, conspiracy to commit wire fraud, and money laundering. The Department of Justice (DoJ) has called it the “first criminal case involving an attack on blockchain integrity”. Prosecutors claim the brothers accessed pending Ethereum transactions and reordered them to benefit their own wallets, allegedly obtaining around $25 million in crypto in just 12 seconds. The funds were then allegedly transferred to multiple addresses, including offshore exchanges, to conceal the trail.
The defense maintains that the brothers simply used "predatory" trading bots and that no fraud was committed, arguing that the victims were outsmarted rather than illegally targeted. They also contend that MEV bots are a recognized part of the Ethereum ecosystem and that exploiting arbitrage opportunities does not inherently constitute criminal behavior.
MEV, or maximal extractable value, allows blockchain participants to reorder, insert, or censor transactions to profit from arbitrage opportunities. MEV bots scan the mempool for arbitrage opportunities, exploiting price differences or predictable price movements based on pending transactions. While MEV can help stabilize Ethereum by rewarding validators, misuse can create unfair advantages or losses for other network participants.
Judge Jessica Clarke had previously denied a motion to dismiss the fraud charges, stating that the government adequately alleged their conduct met the criteria for fraud. The brothers had argued that the wire fraud statute did not provide fair notice that their conduct was criminal since their actions were "permitted by the system's code".
The outcome of this trial is expected to have significant implications for Ethereum, DeFi platforms, and the broader crypto industry. A guilty verdict could lead to tighter regulatory oversight, while a verdict in favor of the defense could reinforce the legitimacy of MEV bots as tools for advanced trading strategies. The trial, which is expected to extend into early November, will determine whether MEV bots are considered a legitimate arbitrage tool or an instrument for illegal criminal activity.
