Brothers Charged with $25M MEV Bot Fraud

Plus Senate Prepares to Vote on Repealing SEC’s SAB 121

Author

Nathaniel Whittemore
May 16, 2024

The Breakdown First Five - Thursday, May 16, 2024

Welcome back to The Breakdown First Five — the 5 most interesting and/or important stories in bitcoin, crypto, and markets to start your day.

Brothers Charged with $25M MEV Bot Fraud

5. CME to Launch Spot Bitcoin

Bitcoin futures markets on the CME rapidly grew over the past year to rival the largest crypto native platforms. Now the exchange is planning to launch Bitcoin spot markets. While institutional traders can already access crypto exchanges or Bitcoin ETFs, spot markets on the CME could massively simplify their activities. Having spot and futures in the one place means a simplification of margin requirements and would make basis trades much easier to execute. 

4. Chinese Underground Bank Busted

Chinese authorities have dismantled an underground bank operating using Tether. Police allege the bank has handled over $1.9B worth of transactions, largely related to medicine and cosmetic smuggling and capital flight. 193 suspects have been arrested nationwide and $20M in assets have been seized. The bank reportedly began operations in January 2021 in Sichuan province. 

3. More Bitcoin ETF Disclosures

The latest Bitcoin ETF whale is Millennium Management, who disclosed a massive $1.9B position across five different products. This position represents 3% of the giant hedge fund’s $64B in AUM. This latest round of disclosures also featured more modest positions from Apollo Management and Elliott Capital. These funds are likely just in it for the trade rather than the long term, but this is still massive institutional interest. 

2. Senate Showdown on SAB 121

Controversial SEC accounting guidance is headed for a fiery vote in the Senate later today. Every indication suggests the bill to repeal SAB 121 has the votes, implying that multiple Democrats are ready to defy their party on the issue. If the vote passes it will force the President to follow through with his veto threat or capitulate to the shifting political tides. Dem. Wiley Nickel wrote to the SEC yesterday to ask them to withdraw SAB 121 instead.  

1. MEV Boosters

A pair of brother have been charged with wire fraud for ripping of MEV Bots for $25M. The attack relied on an exploit of MEV-Boost software that has since been patched. The brothers trapped the bots with a fake transaction and then front ran their MEV extraction. This is the most technically complicated crypto prosecution we’ve seen to date and suggests that the DOJ has become more sophisticated about crypto crime.