Early Ethereum advisor Steven Nerayoff has been arrested as part of an alleged, multi-million dollar extortion scheme involving cryptocurrency.
Old-Fashioned Shakedown
Nerayoff, a tech entrepreneur who has advised projects such as Ethereum and tZero, was arrested on Sept. 18 on charges of extortion. The charges were jointly announced by the U.S. Attorney for the Eastern District of New York and the FBI’s New York Field office.
According to the release Nerayoff, alongside Michael Hlady, threatened to “destroy” a Seattle-based crypto startup if they were not paid millions of dollars in ether (ETH). The mobile startup in question was planning to issue crypto tokens as loyalty rewards for clients to attract users.
Richard P. Donoghue, U.S. Attorney for the Eastern District of New York, said,
As alleged, Nerayoff and Hlady carried out an old-fashioned shakedown, to be paid off with 21st century cryptocurrency.
He continued,
When you peel back the layers of this case, an age-old extortion scheme is revealed with a modern-day twist. Imposing forceful demands on a company for personal gain is risky business, whether one's preference is to be paid off with cryptocurrency or cold hard cash.
Neyaroff had originally entered an agreement to help the startup launch a successful ICO in exchange for 22.5% of the proceeds. However, just days before the ICO launch, Nerayoff told executives of the startup that his compensation would need to be increased to $8.75 million worth of ether or else he would sabotage the project.
Both Neyaroff and Hlady face up to 20 years in prison if convicted.
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