Ethereum co-founder Stephen Nerayoff arrested for extortion

Entrepreneur Steven Nerayoff, who participated in the development of Ethereum, CasperLabs, tZero and dozens of other projects, was arrested on charges of extortion.

US Attorney in the Eastern District of New York and FBI New York Office speak
with a joint statement regarding the arrest. Together with Nerayoff, Michael Hlady was arrested on a similar charge.

Two men are charged with threats of sabotaging an ICO startup in Seattle, which issued cryptocurrency tokens as part of a reward program to help customers attract users and sell their products. In November 2017, the company planned an ICO and agreed to conclude an agreement according to which 22.5% of all raised funds and 22.5% of issued tokens will be transferred to Nerayoff for supporting the ICO.

However, a few days before the ICO, Nerayoff demanded an additional 17,000 ETH worth nearly $ 8.5 million for additional work. This would increase his total compensation to 30,000 ETH. He threatened to disrupt the ICO and destroy the company if his requirements were not met. The company agreed to the new conditions.

Nerayoff later introduced the Khladi company. In March 2018, two men allegedly threatened the company and demanded a “loan” of 10,000 ETH in the amount of ~ $ 4.45 million. The money was sent to Nerayoff and he did not return it later. William F. Sweeney Jr., Assistant Director of the FBI New York Office, said:

“When considering this case, it becomes clear that the old extortion scheme with a modern twist is being implemented. Imposing strict requirements on the company for personal gain is a risky business, regardless of whether it is about cryptocurrencies or traditional money. ”

Nerayoff and Khladi first appeared in federal court this week. They may be sentenced to imprisonment of up to 20 years.

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At the beginning of last year, Nerayoff called
himself an “architect” of Ethereum. Then he predicted that the price of ether will triple in a year, which could lead to a global upheaval, after which ether will become the most valuable cryptocurrency.