A 12-second cryptocurrency transaction is at the center of a major federal trial. As reported by Business Insider, former Massachusetts Institute of Technology students James and Anton Peraire-Bueno are accused of using their advanced coding and math skills to steal $25 million in Ethereum's "ether" currency through what the prosecutors call a "first-of-its-kind" fraud scheme.
The alleged heist took place in April 2023, and prosecutors say it was "meticulously planned" over at least three months. The trial began Oct. 14 in Manhattan federal court, where a jury will decide whether the brothers committed fraud or just outsmarted "bots" as the defense claims.
Federal prosecutors allege the brothers exploited a software vulnerability in the Ethereum blockchain to intercept pending private transactions and tampered with the transactions during the 12 seconds. During that brief window, prosecutors said the brothers replaced legitimate trades with junk crypto, effectively rendering the entire transaction worthless.
They add that they disguised their identities and moved the crypto assets through a "web of shell companies, crypto addresses, and foreign crypto exchanges," as reported in BI. If convicted for conspiracy, wire fraud, and money laundering, each brother could face up to 20 years in prison per charge.
On the other hand, their defense attorneys argue there was no fraud or intent to defraud at all. "There's no central authority. … And there's no government regulations. Instead, economic incentives guide parties' behavior," said Patrick Looby, who is representing James Peraire-Bueno, per BI.
The defense maintains that the brothers simply took advantage of "predatory trading bots" using economic incentives. They said the alleged victims made risky bets that didn't work out for them. "But there was nothing stolen and there was no theft, as that word would normally be used," Looby said.
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Crypto oversight has been a point of contention for years, and a report from the United Nations Office on Drugs and Crime found this year that cryptocurrency exchanges have become an integral part of organized crime.
In addition to financial injustices, environmental injustice has also faced criticism. Electricity demand in the U.S. has grown rapidly from crypto mining, and it was found that miners around the world used as much electricity as all of Australia in 2023, according to the U.S. Energy Information Administration, though it should be noted that the Ethereum platform switched to a proof-of-stake validation system in 2022 that reduced its energy demands by about 99.5%.
Crypto's major impact through its reliance on dirty energy leads to environmental consequences, including an increase in extreme weather events. The 12-second transactions use roughly as much energy as needed for six houses in a day, according to an Energy Star report.
The brothers' trial could set a precedent for how the U.S. government interprets fairness and fraud in decentralized digital spaces. The trial is expected to continue through early November.
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