Ethereum’s ICO architect has been arrested for allegedly extorting $ 12 million worth of cryptocurrencies
Two people in the United States, including a former advisor to various blockchain projects, including Ethereum, were arrested for their alleged role in a series of multi-million dollar cryptocurrency extortions.
Former Ethereum advisor Steven Nerayoff and Michael Hlady were arrested after allegedly threatening to “destroy a cryptocurrency startup if they weren’t paid millions of dollars”, according to a Justice Department statement.
“As claimed, Nerayoff and Hlady conducted an old-fashioned shakedown to be paid for in the 21st century cryptocurrency,” United States attorney Richard Donoghue said in the statement.
The target company was a nameless startup based in Seattle that uses cryptocurrency to reward customer loyalty. The nameless company makes blockchain-based products for those who want to generate and reward user traffic.
The allegations are against Maple Ventures, an offshoot of Alchemist LLC, a blockchain consulting firm founded and run by Nerayoff, CNBC reports.
It’s also worth noting that Nerayoff was instrumental in constructing the legal architecture behind Ethereum’s token offerings. On his own website, he claims to have been named the “Architect of the ICO”. One of his youngest companies, which he co-founded, CasperLabs, introduced its scalable blockchain earlier this year to demonstrate its use in its test network.
Photo credit: StevenNerayoff.com
The first blackmail
In July 2017, the nameless company planned an initial coin offering (ICO) as a fundraising mechanic and signed a contract with the organization run by Nerayoff.
Under this contract, Nerayoff agreed to contribute to the provision of the ICO in exchange for 22.5 percent of all funds raised and 22.5 percent of the tokens issued. Just days before the start of the ICO, Nerayoff allegedly asked for more from the company.
According to the DoJ, Nerayoff called for his share of the originally agreed 13,000 ETH to be increased by 17,000 ETH. This would have given the accused Ethereum worth $ 8.75 million at the time.
Nerayoff is accused of threatening to destroy the company if it does not comply. The company paid – but said it had not received any further services from Nerayoff or his organization.
The second blackmail
The company was then introduced to one of Nerayoff’s associates, Michael Hlady, who was described as the “operations guy.” Hlady told applicants that he had been part of various government agencies, including the NSA and the CIA. It is alleged that he also said he “knocked down” a head of state
In March 2018, Nerayoff requested the Seattle-based company for a loan of 10,000 ETH (approximately $ 4.45 million at the time). Hlady allegedly followed up Nerayoff’s demands with text messages that threatened to “destroy the company’s community”.
DoJ complaint document
After the threats, the company committed, but the loan was never repaid. Here the allegations take an even darker turn.
According to the DoJ complaint document, applicants allegedly stayed with Nerayoff in New York after being unable to travel due to bad weather.
The complaints allege that both Hlady and Nerayoff entered the applicant’s bedroom that evening, making threats and demands for more money.
DoJ complains against Nerayoff
Nerayoff appeared in court yesterday and was released on bail for $ 750,000. Hlady was also in court yesterday and asked to appear again next week, reports CNBC.
While the idea of this old-school shakedown is pretty terrifying, the charges brought before Nerayoff and Hlady are charges and the couple has yet to be found guilty. In this case, the duo could be sentenced to a maximum of 20 years’ imprisonment.
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