No honor among bots?

Throwing a pitch in the dirt — even deliberately — is not a crime. 

Nor is choosing to throw a pitch above or below 94.5 miles per hour, as prosecutors in the Eastern District of New York have also accused Emmanuel Clase and Luis Ortiz of doing.

Instead, the two Cleveland Guardians are charged with crimes that happened off the field: wire fraud, money laundering and bribery. 

It shouldn’t be difficult to prove. 

Evidence includes text messages the accused sent to co-conspirators letting them know their next pitch would be in the dirt — and, yes, the texts were sent during games.

To convict, prosecutors need only show that the defendants and their co-conspirators placed bets on these pitches.

Any jury will understand that as fraud: Betting on an event you know is fixed defrauds the person on the other side of the wager.

Jurors therefore only have to be shown two things: that the event was rigged and that the bets were placed.

By contrast, the jury weighing the same charges — wire fraud and money laundering — in the Ethereum-exploit case United States v. Peraire-Bueno faced a much harder task.

Unlike the MLB case, what happened was not in dispute: The brothers Peraire-Bueno made $25 million by tricking Ethereum sandwich bots into being sandwiched themselves.

But why would that amount to wire fraud or money laundering?

Prosecutors said the brothers “stole” the money — but theft was not among the crimes they were charged with.

Like the MLB pitchers, the brothers were charged with actions (wire fraud and money laundering) that can only happen off the field and off-chain, respectively.

In the pitch-rigging case, what happened off the field was the betting. 

In the crypto case, what happened off-chain was simply the profits being moved around — partly, the brothers said, to pay taxes on their hard-earned capital gains.

For that to be a crime, prosecutors had to show that someone, somewhere was defrauded by the Peraire-Bueno brothers’ exploit.

This is what the jury had to decide: not what had happened, but who, if anyone, was defrauded.

After lengthy deliberations, the jury ultimately decided not to decide: On Friday, United States v. Peraire-Bueno ended in a mistrial.

Based on a transcript of the trial, I’d say they made the correct decision.

If the analogies don’t fit, you must acquit 

Prosecutors argued that the operators of the MEV bots who lost money to the Peraire-Bueno brothers’ MEV bots were the victims of fraud.

The brothers, they said, “engaged in false pretenses by holding themselves out as an honest validator,” which fraudulently duped MEV-sandwich bots into trading with them.

In that telling, the bots are like the unsuspecting sports bettors wagering that Emmanuel Clase would throw a strike against people who knew for sure he’d throw a ball.

No one thinks that’s fair.

The defense, however, countered that “posing as an honest Ethereum validator is a nonsensical allegation.” 

Validators are just code, they reasoned, and it’s impossible for code to “pose” as honest or dishonest, or anything at all.

“When did this posing happen?” the defense asked, adding that everything happened in code and the code was there for anyone to read.

This, in effect, was what the jury was asked to determine: Can code be dishonest?

Unfortunately, the Ethereum code in question is impossibly complex.

Peter Van Valkenburgh seems to speak for the few who understand both Ethereum code and the law when he concludes that the Peraire-Bueno brothers “profit maxed up to the limit of Ethereum's consensus rules.”

Playing by the rules is never a crime — but in the case of Ethereum, what jury would understand them?

The defense repeatedly tried to make Valkenburgh’s line of reasoning more accessible with references to the far-simpler world of sports:

I doubt any of that got the jury any closer to understanding the rules of Ethereum consensus. 

But the prosecution responded with its own, less flattering analogy, comparing the brothers’ exploit to “walking into a casino with a device that allows you to game the system.”

It might have helped if either side explained how that system worked, but neither did.

The prosecution also added the term “shitcoin” to the legal lexicon, perhaps to make the whole operation seem even more disreputable than a casino. 

In cross-examinations, the defense invoked O.J. Simpson and The Sopranos Season 1, to no obvious purpose.

Predictably, the cumulative effect of all this for the jury was confusion.

“We are under stress,” the jury wrote to the judge late in their deliberations. “Yesterday, some cried. Many have not slept.”

Judge Clarke, having endured the same parade of analogies, was sympathetic to their plight: “This is their 11th note,” she told the attorneys. “No progress. I’m going to declare a mistrial.”

It was the only decent thing to do.

Afterward, an exhausted juror told Inner City Press that the case “was just too complicated.”

Of course it was. 

The rules of Ethereum are infinitely more complex than the rules of baseball, and jurors were given nowhere near enough information to understand them.

Can one MEV bot truly deceive another?

Can what happens on the playing fields of Ethereum warrant a conviction on real-world crimes?

It will take more than sports analogies to decide.

— Byron Gilliam

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