A Nassau County man was one of two who were charged today with trying to extort a Seattle-based startup company for millions of dollars, the U.S. Attorney’s office said.
Steven Nerayoff, 48, of Great Neck, and Michael Hlady, 47, of East Greenwich, Rhode Island, threatened to destroy the company if they were not paid millions of dollars in the cryptocurrency Ether, the U.S. Attorney’s office said. Nerayoff is a lawyer.
with extortion. Nerayoff, an attorney, and Hlady threatened
“As alleged, Nerayoff and Hlady carried out an old-fashioned shakedown, to be paid off with 21st century cryptocurrency,” said United States Attorney Richard Donoghue. “This office and our partners at the FBI are committed to protecting businesses from extortion, whether the demands are for U.S. dollars or cryptocurrency.”
The company that was targeted specializes in generating user traffic to clients’ products by issuing its own cryptocurrency tokens as loyalty rewards. In November 2017, the company planned an Initial Coin Offering (ICO) to raise capital, and signed an agreement with an entity operated by Nerayoff, Donoghue said.
Under the agreement, Nerayoff agreed to help the company with its ICO in exchange for 22.5 percent of all funds raised, as well as 22.5 percent of the issued cryptocurrency tokens. However, just days before the ICO, Donoghue said that Nerayoff told the company that his compensation would have to increase from 13,000 to 30,000 Ether — which was worth about $8.75 million at the time — or else he would sabotage the ICO. Donoghue said the company paid him off.
Afterward, Donoghue said that Nerayoff introduced the company executives to Hlady, who went by the alias Michael Peters. Hlady told the executives that he had been part of the Irish Republican Army, the NSA, the CIA and the FBI, and that he had “taken down” a head of state, Donoghue said.
In March 2018, Donoghue said that Nerayoff and Hlady threatened one of the executives with the destruction of the company if they were not paid. Later that month, Donoghue said that Nerayoff demanded a loan of $4.45 million-worth of Ether, which he never repaid. He threatened to destroy the company if his demands weren’t met, Donoghue said.
“When you peel back the layers of this case, an age-old extortion scheme is revealed with a modern day twist,” stated FBI Assistant Director-in-Charge William Sweeney. “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. The FBI will continue to seek justice for victims whose businesses have been targeted by these types of scams.”