The US Attorney's Office for Eastern District of New York <a href="https://www.justice.gov/usao-edny/pr/two-arrested-extortion-startup-cryptocurrency-company">announces</a> the arrest of Steven Nerayoff and Michael Hlady who have allegedly threatened to destroy a mobile-based Cryptocurrency startup unless they got paid millions of dollars in Ether (ETH) Cryptocurrency.

The charges were announced by the US Attorney for Eastern District of New York, Richard P. Donoghue and Assistant Director In-charge Of the FBI for New York Field Office, William .F. Sweeny Jr.
<h2>Nerayoff and Hlady To Face Extortion Charges</h2>
Today, the complaint was unsealed in Brooklyn’s federal court and the defendant Hlady and Nerayoff arrested in the morning. The two made an appearance in separate courts in the afternoon, Nerayoff before US Magistrate Judge Steven .L. Tiscione and Hlady in federal court in Providence.

Nerayoff and Hlady will face charges for allegedly carrying out an old-fashioned extortionist scheme and throwing in a modern twist by requesting payment in Cryptocurrency. US Attorney Donoghue stated: 

“As alleged, Nerayoff and Hlady carried out an old-fashioned shakedown, to be paid off with 21st-century Cryptocurrency. This Office and our partners at the FBI is committed to protecting businesses from extortion, whether the demands are for US dollars or Cryptocurrency.
<h2>Deal Gone Wrong</h2>
The crypto start held an <a href="https://www.nytimes.com/2017/10/27/technology/what-is-an-initial-coin-offering.html">Initial Coin Offering</a> (ICO) to raise funds. They agreed with Nerayoff’s company to help them achieve a triumphant return from the ICO.

Days before the ICO took place, Nerayoff contacted executives from the startup and demanded an increase of approximately 13,000 <a href="https://docs.ethhub.io/ethereum-basics/what-is-ether/">ETH</a> worth around $8 million at the time. He threatened to destroy the company and sabotage the ICO, and the company had to oblige and pay him.

Nerayoff went further and introduced Hlady to the startup’s executives as his operations guy under an alias, Michael Peters. Hlady claimed to be a former member of the National Security Agency, The CIA, <a href="https://www.cryptoknowmics.com/crypto/fbi-and-israeli-police-take-down-bitcoin-enabled-darknet-listings-site/">FBI</a>, and Irish Republican Army.

Later, the two threatened one executive from the company in March 2018, demanding more digital money and company tokens. Once again in the same month, Nerayoff demanded a 10,000 <a href="https://www.cryptoknowmics.com/crypto/arab-bank-switzerland-offers-bitcoin-eth-custody-and-brokerage-services/">ETH</a> loan amounting to about $4 million at the time.

 He sent Hlady a dog-attacking-text threatening the Executive “I promise I will destroy your community” if they failed to meet his demands. The company made the 10,000 ETH transfer, but he never repaid the loan. 

The Office’s Business and Securities Fraud Section will handle the government’s case. Assistant US Attorney Mark E. Bini and Andrey Spektor will handle the prosecution. The two could face up to 20 years in prison if found guilty of these allegations.

New York’s US Attorney Office Arrests Two Cryptocurrency Startup Extortionists

Am Wayne, a Blockchain enthusiast and expert in crypto trading. Currently, I cover trendy issues on digital currencies.

New York’s US Attorney Office Arrests Two Cryptocurrency Startup Extortionists

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