The Defense: No Fraud in the Wild West of Crypto
Defense attorneys for the Peraire-Bueno brothers are mounting an aggressive challenge to the government’s characterization of their clients’ conduct. According to prosecutors, the defense has rejected any consideration of a plea deal.
Patrick Looby, representing the elder brother James, laid out the defense theory during oral arguments in June before Judge Clarke. His core arguments rest on three pillars:
No Central Authority, No Rules. “There’s no central authority” governing the Ethereum blockchain, Looby told the court. “And there’s no government regulations. Instead, economic incentives guide parties’ behavior.” The defense argues that prosecutors are attempting to criminalize conduct that has never before been defined as illegal, including exploiting software vulnerabilities or using transactions as “bait.”
No Communication, No Fraud. Looby argued that fraud requires “a promise to the victim.” He emphasized that “there is no alleged communication at all between the Peraire-Buenos and the traders. And for that reason, as well, there’s no alleged intent to defraud.”
Risky Bets, Not Theft. The alleged victims “made very risky bets on a strategy that didn’t pay out,” Looby contended. “But there was nothing stolen and there was no theft, as that word would normally be used.”
In written motions earlier this year, defense attorneys argued that their clients’ alleged conduct amounted to “thwarting a predatory attempt by ‘bots’ engaged in market manipulation.” They asserted that “no Ethereum user would have understood” such actions could lead to criminal charges before this indictment, and that “no court has ever applied these statutes to similar transactions.”
The defense motion to dismiss the indictment was denied, setting the stage for trial.
The defense faces an uphill battle for several reasons:
