US authorities have arrested two individuals for extorting a crypto startup. The two men allegedly threatened to damage the firm if its executives failed to pay them millions of dollars in ETH. The US Attorney’s Office for the Eastern District of New York and the FBI announced this news on September 18.
According to the joint announcement, police officers arrested Steven Nerayoff and Michael Hlady and charged them with extortion. The publication notes that both men have already made their initial appearances in a federal court.
Nerayoff, a lawyer, was the mastermind of this crime. He operated a firm that got into an agreement with the plaintiff, a Seattle-based crypto startup two years ago. The deal involved Nerayoff helping the firm complete a successful ICO. Per the agreement, the startup should have paid Neyaroff 22.5 percent of all raised funds. On top of this, Neyaroff was to receive 22.5 percent of the crypto tokens that the firm would issue.
Changing Terms of Agreement and Threats
While Nerayoff had accepted the initial offer, he changed the terms of the agreement just before the ICO started. He demanded that the firm increase his compensation to 30,000 ETH. At that time, the coins he asked for were worth approximately $8.75 million.
Neyaroff then threatened to sabotage the ICO and destroy the startup if the executives did not increase his pay. The executives had no choice but pay him even though he had not offered any extra services. Afterward, he introduced the firm’s officials to Hlady who he said was his “operations guy”. Neyaroff told them that Hlady had been part of the Irish Republican Army, NSA, CIA, and FBI. He added that Hlady had taken down a head of state.
In March 2018, Neyaroff and Hlady threatened one executive of the firm demanding more funds and company tokens. A month later he demanded a 10,000 ETH loan worth $4.45 million at that time. Hlady then sent the executive a text promising to destroy his firm’s community if he failed to meet Neyaroff’s demands. The firm transferred the funds as instructed. However, the complaint notes that Neyaroff never repaid the loan.
Explaining what the case entailed, William Sweeney, the FBI Assistant Director-in-Charge noted that,
When you peel back the layers of this case, an age-old extortion scheme is revealed with a modern day twist.
He added that,
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 who businesses have been targeted by these types of scams.
Prior to this, a report unveiled that criminals had made $1.2 million in BTC through sextortion and bomb threat scams.
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