Getty Images; Alyssa Powell/BI
- A NYC jury is hearing evidence in the complex crypto fraud trial of the Peraire-Bueno brothers.
- Jurors are getting a three-week master's class on how $25M can be diverted in just 12 seconds.
- For the rest of us, here is a quick glossary of the trial's weirdest terminology.
So Snoopy6353 and Curious Rabbit are brothers, OK?
And they're on trial in Manhattan because back in April 2023, they unleashed their omakase strategy on some sandwich bots in the Ethereum mempool.
Huh?
The $25 million wire-fraud trial of James Peraire-Bueno and Anton Peraire-Bueno, two MIT-educated brothers, has been underway in a federal courtroom since mid-October. And what a crypto-lingo-larded trial it has been.
It's high time for a helpful glossary of some of the trial's more colorful terms. Good luck to us all, and don't let the sandwich bots hit you on the way out of the mempool.
BI/Jorge Castillo
Snoopy6353
Crypto is all about privacy.
It's a world of pseudonyms and cryptographic account numbers. The anonymity is so tight that after two years of investigation, the feds still do not know the identity of two of the three alleged victims, who never came forward.
The brothers on trial have been accused by prosecutors of pulling off a gutsy and unprecedented heist in the roiling crypto trading arena known as the Ethereum blockchain. The pair had oddly guileless online names.
James Peraire-Bueno, 29, went by Snoopy6353. Prosecutors say that in April 2023, he and his brother pulled a classic bait and switch that left three traders holding a bag of essentially worthless crypto — "shitcoins," as prosecutors say the brothers laughingly gloated.
The brothers, meanwhile, pocketed $25 million in stablecoins. It's a crypto bounty their lawyers attribute to the clever pair's "wildly successful" and perfectly legal "trading strategy."
Both sides agree that this small fortune changed hands in the time it takes to add a new block of transaction data to the ever-growing blockchain — 12 seconds.
BI/Jorge Castillo
Curious Rabbit
Anton Peraire-Bueno, 25, who lives with his parents in the Boston area, also used an adorable screen name, as defense lawyers have repeatedly told the highly educated, eight-woman, four-man jury.
(Defense lawyers said "Curious Rabbit" at least five times during opening statements, as in "Anton, the Curious Rabbit," and "As you will find out, Curious Rabbit is really a perfect way to describe Anton.")
Curious Rabbit's curiosity is part of the case. Prosecutors have described a number of his Google searches, including "how to wash crypto."
Also: "Is prison or jail worse?"
And also: "what is the statue of limitations?"
Both defendants are graduates of MIT, where Snoopy was on the sail team, Curious Rabbit was a rower, and their father was and remains a professor of aeronautics and astronautics.
Legal terms may not have been on the curriculum.
Britta Pedersen/picture alliance via Getty Images
The mempool
Now that we've got our toes wet, it's time to dive into the mempool.
The mempool is a publicly-viewable waiting room. It's a kind of limbo where transactions — crypto buy orders, sell orders, software updates — sit and wait to be bundled into "blocks" of data so they can be added to the blockchain.
(A block can contain hundreds of carefully-ordered transactions. A new block is added to the blockchain every 12 seconds — the precise window of the alleged fraud.)
The mempool, this crypto-transaction holding area, isn't very inviting. There's no actual water, no lifeguard, and, sadly, no swim-up bar.
It is, however, infested with metaphorical sharks, also known as "predatory bots." These are crazy-fast bits of pre-programmed software with one purpose in life: to take money from unwitting crypto traders and make money for the traders who turn them loose.
Sometimes smaller bots in the mempool get eaten by bigger bots, as happened here. We'll get to that in a bit.
Scott Suchman for The Washington Post via Getty Images
Sandwich bots
Sandwich bots are a plague on everyday folks who just want to buy some crypto — and the Ethereum mempool is swarming with these little guys, according to testimony.
Here's how they work. Let's say one of these everyday folks — "Joe Crypto," we'll call him — risks a chunk of his life savings on a big cryptocurrency purchase.
Joe's buy order gets kerplunked into the mempool, where it sits in plain sight, waiting to be bundled into a block with other transactions and added to the blockchain.
That's when the sandwich bots attack. In milliseconds, a bot places a trade immediately before and immediately after Joe's big juicy trade — surrounding it like the bread in a sandwich.
The sandwich bot's first piece of bread? That's a big buy order — sometimes for millions of dollars — for the same kind of crypto Joe is buying. The bot's buy order drives the price of Joe's trade up, meaning Joe will now pay more.
The second piece of bread? That's the bot selling everything it bought in that first slice of bread, but at that now-higher price — for a profit. The bot bought low, at the price Joe had hoped to pay, then sold high, all in the blink of an eye.
In crypto parlance, Joe Crypto is now the victim of a sandwich attack. He has been "sandwiched."
According to trial testimony, this is perfectly legal under the rules of the Ethereum blockchain. No proprietary or private data has been breached. The bots merely took advantage of pending-transaction data that anyone can see by peering into the mempool.
Which takes us back to the Peraire-Buenos, and their big appetite for sandwich bots.
Mariah Tauger / Los Angeles Times via Getty Images
The omakase strategy
The Peraire-Bueno brothers spent the first three months of 2023 planning, coding, and running decoy trades with one goal in mind: outwit the sandwich bots and make millions.
They called their multi-step plan the "omakase strategy," and whether that strategy was fair play or fraud is the central question of the trial.
The name comes from the style of Japanese restaurant "where the chef sets the menu," Katherine Trefz, an attorney for James Peraire-Bueno, told the jury.
In this context, the chefs — block "validators," in Ethereum parlance — are the Peraire-Buenos.
In very simplified terms, the brothers set out some tempting, sandwich-meat bait in the mempool and waited for the bots to come. In milliseconds, three snapped at the bait, each building one of those buy-buy-sell sandwiches.
As these three sandwiches moved with lightning speed through the block-building process, the brothers' bigger bots attacked.
Prosecutors say the brothers, with their validator chef's hats firmly in place, were able to exploit a software glitch that let them type in a "poisonous," fraudulent row of zeros — the primary "misrepresentation" in the indictment.
The zeros gummed up the works, letting the brothers switch in three new sandwiches.
The sandwich bots' initial, $25 million buy order? Those three bottom pieces of bread? That bread went straight into the Peraire-Buenos' pockets.
The "meat" of the sandwiches? Well, that cryptocurrency bait had always been in the brothers' control. Prosecutors say the brothers drained this crypto of its liquidity, turning it into "shitcoins."
And that final top piece of bread? The sandwichers' "sell" order, through which they'd hoped to gain a profit? That trade became invalid. It disappeared. These were open-faced sandwiches, in the end.
Low Carb Crusader
Hungry yet?
There's just one more food metaphor here, and we'll make it quick so we can all get something to eat.
According to trial testimony, the omakase attack became public immediately, prompting a mix of criticism and hero worship in crypto circles.
Around two weeks later, the Peraire-Buenos lobbied to clean up their image. They sent an email to Bert C. Miller, head of products and engineering at Flashbots, the company that had designed the otherwise highly regarded software that accidentally let the brothers type in and weaponize those "poisonous" zeros.
Hiding their identities, the brothers noted in their email that they didn't like their negative press. From now on, they told Miller, they wanted to be known as "Low carb crusaders."
It was a "cheeky" reference, defense lawyer William Fick, who represents Anton Peraire-Bueno, explained to the jury during openings.
"Because, you know, sandwiches are made of bread."
The Peraire-Bueno brothers face a potential 20-year sentence for each of the charges against them, conspiracy to commit wire fraud, wire fraud, and money laundering; their trial is set to continue into early November.