Great Neck resident Steven Nerayoff has been indicted in Brooklyn on extortion charges that involved demanding a payoff in cryptocurrency, the U.S. attorney’s office there said.
Nerayoff, 48, a tech entrepreneur, along with an associate, Michael Hlady, carried out an “old-fashioned shakedown,” in the words of Richard P. Donoghue, U.S. attorney for the Eastern District of New York, against a Seattle-based startup cryptocurrency company for $13 million.
Nerayoff was released on $750,000 bond after his court appearance last Wednesday, according to a news release from Donoghue’s office.
“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,” said Donoghue.
Nerayoff has been an adviser for over 25 cryptocurrency-based projects and has founded platforms within the technological currency world. Nerayoff and Hlady reportedly threatened to destroy the company if millions of dollars worth of the cryptocurrency Ether was not delivered to them.
“When you peel back the layers of this case, an age-old extortion scheme is revealed with a modern-day twist,” said William F. Sweeney Jr., FBI assistant director-in-charge.
The U.S. attorney’s office said that the victimized company, whose name has not been released, uses cryptocurrency as a reward for returning customers in order to generate web traffic to clients.
In November 2017, Nerayoff agreed to advise and help the startup company gain initial capital, and in return, he would receive 22.5% of all crypto funds raised. Nerayoff then told the startup company that his profit would have to increase by roughly $8.75 million, or he would destroy the company by sabotaging its initial coin offering, according to the U.S. attorney’s office.
“A civil dispute has been improperly distorted into a criminal matter,” said Nerayoff’s lawyer, Avi Moskowitz. “Mr. Nerayoff looks forward to the truth coming out and clearing his name.”
The U.S. attorney’s office said that Nerayoff introduced Hlady, who went by the alias “Michael Peters,” to the startup company. Hlady was known as Nerayoff’s “operations guy” and claimed he had “taken down” a head of state and had been part of the Irish Republican Army, Central Intelligence Agency and FBI.
Four months after Nerayoff’s initial threat, he followed up by demanding a loan for additional cyber funds of approximately $4.45 million, according to Donoghue’s office. The loan was never repaid, according to officials.
If convicted, Nerayoff and Hlady each face up to 20 years in prison, according to the U.S. attorney’s office.