MIT Students Stole $25 Million In Seconds By Exploiting ETH Blockchain Bug, DOJ Says
MIT Students Stole $25 Million In Seconds By Exploiting ETH Blockchain Bug, DOJ Says
60 comments
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Yea, we wouldn’t want anyone doing anything illegal with crypto… 🙄
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This is a prime example of why the "code is law" selling point for smart contracts is a disaster waiting to happen. Proponents claim you won't need lawyers, arbitrators, courts, etc, but in reality you'll need all those and on top of that programmers to write and verify smart contracts.
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"code is law" can become "might makes right" without oversight. Those who lobby against oversight are a problem.
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US Attorney Damian Williams said the scheme was so sophisticated that it "calls the very integrity of the blockchain into question."
If that’s actually true, they should be given a sentence of time served and a job writing useful software.
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It's not. They tricked some MEV-Boost bots into doing bad trades.
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More likely they'll get the Mitnick treatment.
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They are good at fraud
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It is wrong to criminalize him. He found a bug and got a reward. Bring him in to fix the bug and to make it better. If you start scaring away people hunting for bugs and exploits for fun you will end up being exploited by a much nastier adversary
Edit: I did more research and it seems like there was some questionable actions such as creating a bunch of fake shell companies and crypto exchanges. This wasn't a "bug" as the title is clickbait.
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Nice! Too bad they got caught, though.
No sympathy for cryptobros and trading bots.
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Lesson learned: always use your girlfriend's browser to look up how to do crime.
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You'd think these guys would know how to open a private Firefox tab.
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More likely they should know who to use Tor
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I'll try a simple explanation of what this is about, cause this is hilarious. It's the kind of understated humor, you get in a good british comedy.
For a payment system you must store who owns how much and how the owners transfer the currency. Easy-peasy. A simple office PC can handle that faster and cheaper than a blockchain. But what if the owner of the PC decides to manipulate the records? No problem, you just go to the police with your own records and receipts and they go to jail for fraud. Their belongings are sold off to pay you damages. That's how these things have worked since forever. It's how businesses keep track of their debts.
Just one little problem: What if the government wants your money. Maybe you don't want to pay your taxes, or some fine. Or maybe you have debts you don't want to pay, like your alimony. Perhaps the government wants to seize the proceeds from a drug deal. They can just go to the record keeper and force them to transfer currency.
This is where cryptocurrencies come to the rescue (as it were). There are different schemes. ETH (Ethereum) uses validators. The validators are paid to take care of the record-keeping. The trick is, that you have to put down ETH as a collateral (called staking) to run a validator. If you manipulate the record/blockchain, then the other validators will notice and raise the alarm. That results in you losing your collateral.
This means the validators can remain anonymous. You don't need to know their identities to punish them for fraud. You just take their crypto-money. They need to remain anonymous so that the government (or the mob) can't get to them.
This is where it gets hilarious. These 2 brothers operated fraudulent validators. The stake/the collateral didn't matter at all. The whole scheme didn't matter. It was a horrible waste of money and effort. The indictment even details how they tried to launder the crypto. That is, how they tried to transfer it, so that it couldn't be traced on the blockchain. The indictment even has the search queries they used to look up the info on how to do that.
The whole point of it all is that you supposedly do not need the government to prosecute anyone. If validators are kept honest by the threat of criminal prosecution, then you do not need the whole Proof of Stake scheme. You do not need the whole expensive overhead.
The only rational reason for crypto to exist, is to avoid laws; buying drugs and what not. I'm not judging. The hilarious fact is that the law knew everything about these guys.
It's all a sham. The one thing that crypto is supposed to do: Foil the government. And it doesn't work.
When people want to buy crypto on the blockchain, they put out a request so that a validator will execute that transaction and record it on the blockchain. So, while the request is waiting, a bot comes along and scans it. It may be that a purchase changes the exchange value of a currency. In that case, the bot adds 2 more transactions. First, to buy that currency before the original request, and to sell it afterward. The original request drives up the price in between the buy and sell, so that the bot makes a profit for its operator. The original request has to pay a little extra. That's where the profit comes from.
Sound shady? I hope not, because that's what the victims did.
The accused operated their own validators. At the right time, they put out their own buy request to lure in a bot. When the bot proposed the bundled transactions, their validators feigned acceptance. But then switched out the lure transaction of buying for selling.
The indictment makes a fairly good argument. It's like there is a "contract" between these automatic systems. The trading bot wants the bundled transactions to be carried out exactly so. The validator feigns agreement, but does not follow through.
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Man - that comma in the second sentence murdered my brain. Excellent synopsis though.
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"Each brother faces "a maximum penalty of 20 years in prison for each count," the DOJ said." 😬 They will be going in for a long time.
Thomas Fattorusso of the IRS Criminal Investigation (IRS-CI) New York Field Office, said that investigators "simply followed the money." 🔎💸
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Whoa. A slashdot link? Remember when that wasn't a cesspool, but it's been awhile. For an ars technica summary this was extremely disappointing with regards to details.
My only take away here is that we really should make H.E.B (highly educated brothers) a part of the vernacular.
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I'm honestly very surprised that site is still around. Like digg.
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Sorry, the term HEB is already taken by Texas groceries.
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And if you didn’t know it was for “Howard E Butt” now you know and can enjoy them even more.
I fucking miss HEB.
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Remember when the slashdot effect was a thing that mattered?
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not stole. Were given.
If code is law, then they just found the right way to ask. And the code gave the money to them, because they asked nicely.
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Code isn't law. The article above does a bad job of explaining it and makes it sound like it was just a weekend bug find. It wasn't a bug, it was them setting up a bunch of fake entities misdirect funds.
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incoming JSTOR replay in the courts, here we go!
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The article leaves out information. Basically they set up fake crypto exchanges and committed fraud
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charged with conspiracy to commit wire fraud, wire fraud, and conspiracy to commit money laundering
It seems that they went to great depth to make this happen
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60 comments
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.
This is like saying they discovered how to pick a lock so deserve everything in whats locked by it.
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.
They created a bunch of fake shell companies in foreign companies and were preparing to flee the US
Doesn't sound a huge deal different to High Frequency Trading, and Wall Street nobheads fall over themselves to exploit that.
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.
That makes no sense to me. The mempool is public, everyone can see pending transactions.
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.