Web3 is Going Just Great

Altogether, the attacker was able to swap around $21 million of the GALA tokens into ETH before the address was frozen.

The attacker was able to perform the exploit because they had access to a wallet with admin access to the Gala Games smart contract. It's not clear if the attacker is a rogue employee, or if an admin wallet was compromised.

As of writing, Gala Games has not publicly acknowledged the attack.

Investigators for the bankruptcy proceedings found that Pleterski had invested less than 2% of customer funds. Around $16 million instead went to personal expenses, including luxury cars, a $45,000-a-month lakefront mansion, private jets, and vacations.

Even after being sued, filing for bankruptcy, and being kidnapped and beaten by angry investors, Pleterski flaunted his supposed wealth online. Much to the indignation of the creditors in his bankruptcy, he has continued to regularly livestream himself gambling for hours, spending $150,000 on Legos, and driving luxury cars.

Pleterski was released the same day he was arrested, thanks to a CA$100,000 (~US$75,000) surety bond posted by his parents.

According to the Justice Department, the Peraire-Buenos exploited a flaw in popular MEV software called "MEV-boost", which is used by most Ethereum validators. By creating their own validators and "bait transactions", they were able to trick MEV bots into proposing transactions involving illiquid cryptocurrencies, which the brothers then frontran. They were able to create false signatures that tricked a MEV-boost relay into releasing information about upcoming blocks that they were able to tamper with.

The brothers were charged with conspiracy to commit wire fraud, wire fraud, and conspiracy to commit money laundering, and face up to 20 years in prison for each charge.

The Justice Department is describing the case as a "first-of-its-kind manipulation of the Ethereum blockchain". The case is an interesting one, as some believe the practice of MEV itself exploits Ethereum users. Others believe anything you can do with code should be allowed — "code is law". However, by signing false transactions and tricking the relay into releasing private information, the brothers' actions do seem to go beyond simply making profits in a "code is law" Wild West, and into the realm of actual fraud.

The case is a concerning one, as sanctioning software developers for how the code they write is used — particularly when it comes to software intended to protect privacy — has frightening implications. Although there is some precedent in the United States that "code is speech", and merely writing and publishing code is protected by the First Amendment, that obviously does not apply to the Netherlands. A collaborator to Pertsev, Roman Storm, is set to be tried on charges of money laundering and sanctions violations in the United States in September, and that case is likely to grapple with this exact issue.

Cypher was hacked for $1 million in August 2023, but was able to recover around $600,000 of the stolen funds, which they promised to distribute to impact users via a redemption fund. However, over a period of months and unbeknownst to the rest of the team, hoak had been dipping into the recovered funds — taking around half of what was in the fund for himself.

After he was accused, hoak fessed up in a public statement where he wrote that his actions were a "culmination of what snowballed into a crippling gambling addiction and probably multiple other psychological factors that went by unchecked for too long." He continued: "I know likely nothing I say or do will make things better - perhaps other than rotting in jail. To address the elephant in the room, the allegations are true, I took the funds and gambled them away. I didn’t run away with it, nor did anyone else."