U.S. law enforcement has charged Steven Nerayoff, an early supporter of the ethereum project and a former paid advisor to Overstock’s tZero, with extortion.
Nerayoff, an attorney and founder of blockchain consulting firm Alchemist, was arrested Wednesday morning by the Federal Bureau of Investigation (FBI) and was scheduled to face charges before a federal court in Brooklyn in the afternoon. The FBI also arrested Michael Hlady, an Alchemist associate.
Nerayoff and Hlady face up to 20 years in prison if convicted of the alleged scheme, described as “an old-fashioned shakedown” by the United States Attorney Office’s for the Eastern District of New York (part of the Department of Justice) and “an age-old extortion scheme … with a modern-day twist” by the FBI.
Nerayoff’s attorney, Avi Moskowitz, told CoinDesk that “a civil dispute has been improperly distorted into a criminal matter. Mr. Neryaoff looks forward to the truth coming out and clearing his name.”
According to the government’s complaint, Nerayoff’s firm was tapped to advise an undisclosed, Seattle-based startup — dubbed “Company 1” in court documents – in July 2017. Nerayoff began demanding larger than contractually agreed-upon ethereum payouts for his help with the company’s initial coin offering (ICO) that coming fall, the complaint says,
Per the agreement, Nerayoff was entitled to 22.5 percent of all the cryptocurrency tokens sold during the ICO as well as 22.5 percent of all the funds raised by Company 1 “regardless of the method and manner in which [the funds] are raised.”
Before the ICO occurred, Nerayoff demanded higher compensation from Company 1 executives, identified as John and Jane Doe. Through an email sent to the company’s executives,