Here is a more detailed explanation of the exploit.
The Pepaire-Bueno brothers exploited a bug in MEV-boost’s code that allowed them to preview the content of blocks before they were officially delivered to validators, according to the indictment.
The brothers created 16 Ethereum validators and targeted three specific traders who operated MEV bots, the indictment said. They used bait transactions to figure out how those bots traded, lured the bots to one of their validators which was validating a new block and basically tricked these bots into proposing certain transactions. […]
So hardly an attack on any core system of cryptocurrencies.
So they discovered faulty code and made some money?
Can anyone explain to me how this is illegal?
The code is a contract. If someone writes bad code and loses money, then write better code - just like if someone writes a bad legal contract and loses money.
IANAL and all, but bad/unfavorable contracts and literal deception/fraud are two different things, at least in the legal system. Not everything that’s technically possible is also allowed, obviously.
Compare it to using a security flaw to hack into a system. Technically you’re only using the official API, maybe in unusual ways, but still. But you’re doing it in bad faith and causing harm, maybe pretending to be someone you’re not or injecting fake data into the system, and that can make a difference.
Hacking a private corporate system, which is generally on closed nets and requires an internal actor / phishing, is significantly different from exploiting a code fault on a public network.
Trustless systems rely on mathematics to secure their networks. This is both the revolution of them and the risk. If you build a system of value and it is on a public network, and you fail to properly secure it, that is supposed to be the risk. You lose money, hopefully go bankrupt / lose credibility, and a more efficient actor eats your lunch.
Treating it like a traditional system with these unspoken legal safeguards when it uses a public blockchain and public network is absurd.
You can’t just make up your own permission and punishment system, and then expect the legal system to just step aside and let it handle all disputes, especially when it comes to fraud. That’s like founding your own city in an existing country, and declaring all existing law obsolete. I know some people think this is a real possibility, but the real world doesn’t work like that.
It is more like finding a gold mine on public BLM land. It is over treacherous mountains only experienced climbers can access. There are no signs or doors saying it is licensed to anyone; indeed, it isn’t officially registered with BLM. So the climbers go in and take as many gold nuggets as they can carry.
Unbeknownst to them, it was a mine discovered by rich and connected people who have cronies in BLM. Rangers go and arrest the climbers and say that you aren’t allowed to climb, climbing is illegal, and taking gold from that mine is illegal because someone else found it and dug it, even though they didn’t properly secure it nor did they put up any signs. They assumed the mountain was enough protection.
You withdraw cash at an ATM but the software has faulty code which causes your balance to remain the same after withdrawing any amount.
You notice this and then empty the entire ATM this way, making $200,000. I’m sure once you explain to the jury that the ATM just gave you a bad contract, they will acquit you.
“These brothers allegedly committed a first-of-its-kind manipulation of the Ethereum blockchain by fraudulently gaining access to pending transactions, altering the movement of the electronic currency, and ultimately stealing $25 million in cryptocurrency from their victims,” said Special Agent in Charge Thomas Fattorusso of the IRS Criminal Investigation (IRS-CI) New York Field Office.
Good to know the prosecutors have an understanding of what they’re prosecuting… Not even a single mention of MEV in the DoJ press release.
gaining access to pending transactions, altering the movement of the electronic currency, and ultimately stealing $25 million in cryptocurrency from their victim
I skipped “fraudulent” because neither MEV bots nor this attack can be called fraudulent imo, although MEV is definitely taking value one didn’t help create.
Here is a more detailed explanation of the exploit.
So hardly an attack on any core system of cryptocurrencies.
So they discovered faulty code and made some money?
Can anyone explain to me how this is illegal?
The code is a contract. If someone writes bad code and loses money, then write better code - just like if someone writes a bad legal contract and loses money.
The justice system is awful.
IANAL and all, but bad/unfavorable contracts and literal deception/fraud are two different things, at least in the legal system. Not everything that’s technically possible is also allowed, obviously.
Compare it to using a security flaw to hack into a system. Technically you’re only using the official API, maybe in unusual ways, but still. But you’re doing it in bad faith and causing harm, maybe pretending to be someone you’re not or injecting fake data into the system, and that can make a difference.
Hacking a private corporate system, which is generally on closed nets and requires an internal actor / phishing, is significantly different from exploiting a code fault on a public network.
Trustless systems rely on mathematics to secure their networks. This is both the revolution of them and the risk. If you build a system of value and it is on a public network, and you fail to properly secure it, that is supposed to be the risk. You lose money, hopefully go bankrupt / lose credibility, and a more efficient actor eats your lunch.
Treating it like a traditional system with these unspoken legal safeguards when it uses a public blockchain and public network is absurd.
What’s absurd is this crypto maximalist take.
You can’t just make up your own permission and punishment system, and then expect the legal system to just step aside and let it handle all disputes, especially when it comes to fraud. That’s like founding your own city in an existing country, and declaring all existing law obsolete. I know some people think this is a real possibility, but the real world doesn’t work like that.
This is like saying they discovered how to pick a lock so deserve everything in whats locked by it.
The didn’t pick the lock, they created bunch of fake exchanges.
No.
It is more like finding a gold mine on public BLM land. It is over treacherous mountains only experienced climbers can access. There are no signs or doors saying it is licensed to anyone; indeed, it isn’t officially registered with BLM. So the climbers go in and take as many gold nuggets as they can carry.
Unbeknownst to them, it was a mine discovered by rich and connected people who have cronies in BLM. Rangers go and arrest the climbers and say that you aren’t allowed to climb, climbing is illegal, and taking gold from that mine is illegal because someone else found it and dug it, even though they didn’t properly secure it nor did they put up any signs. They assumed the mountain was enough protection.
This is closer to the situation.
Imagine believing that regular people have any rights whatsoever to “public” land.
You withdraw cash at an ATM but the software has faulty code which causes your balance to remain the same after withdrawing any amount.
You notice this and then empty the entire ATM this way, making $200,000. I’m sure once you explain to the jury that the ATM just gave you a bad contract, they will acquit you.
Frustratingly vague for a Slashdot write-up.
Good to know the prosecutors have an understanding of what they’re prosecuting… Not even a single mention of MEV in the DoJ press release.
What’s funny is that that’s a description of MEV.
I skipped “fraudulent” because neither MEV bots nor this attack can be called fraudulent imo, although MEV is definitely taking value one didn’t help create.
Let them eat MEV bot operators.