The FBI arrested Steven Nerayoff, a US lawyer known for his work on advising ICOs, including the Canadian ICO Ethereum, and charged him with extortion. His case is in the Eastern District of New York.
According to a complaint unsealed yesterday, Nerayoff is alleged to have threatened to destroy a company launching an ICO in Seattle if they did not pay him millions of dollars.
Nerayoff was retained by the Seattle company to assist it to launch an ICO for a commission of 22.5% of all funds raised and 22.5% of all of the coins issued pursuant to the ICO. Just before the ICO was to launch, Nerayoff allegedly told his client it would have to pay him almost double the commission (equal to $8.75 million back then) or he would destroy the company and sabotage the ICO.
The client paid the additional funds. Nerayoff allegedly did not perform additional legal services or other services for the increased commission.
Nerayoff is alleged to have introduced a guy named Michael Hlady to the Seattle company executives.
Hlady alleged that he was a member of the US secret service and had taken down a head of state. Subsequently, they both allegedly threatened the Seattle company with its destruction unless they paid them more money.
Part of the alleged extortion involved a course of conduct whereby Nerayoff and Hlady undertook searches to find out the name and location of the children of one of the startup’s founders, who was a woman, and looked up her previous employment history and let her know that they had that information, presumably to intimidate her.
Nerayoff and Hlady then asked for large sums of money.
Allegedly, the co-founder let Nerayoff and Hlady stay at her home on one occasion and on that night, Hlady allegedly woke the woman up from sleep one night and told her that if the startup did not give him $10 million, he would destroy her and harm her company.
Nerayoff runs a Blockchain company called Alchemist which allegedly advises the Toronto-based ICO called AION.
The bio of Nerayoff says he created the concept of ICOs, and says that he co-owns CasperLabs, a proof of stake startup, through a parent company.
Nerayoff has other Canadian connections besides Ethereum and AION – he says he is the chairman of a TSXV listed company called Global Blockchain Technologies, a reporting issuer in British Columbia.
In its pubic investor disclosure, it promised investors that their investment would be used to make Global Blockchain Technologies become the SWIFT of Blockchain.
Global Blockchain Technologies is not now, and never was, the SWIFT of Blockchain.
It has now changed it named and morphed into becoming a company that services online gambling companies from Vancouver.
It is not registered by the provincial regulator, the Gaming Policy and Enforcement Branch, to provide services to any gambling company.
Here Global Blockchain Technologies is promoted as the “world’s first publicly traded stock that invests in top-tier Blockchain and digital currency innovations.”
Nerayoff also says he is an advisor for the ICO of Toronto-based Polymath; and online, the latter confirms he is their advisor. In its promotional material to investors, Polymath represented that Nerayoff is the co-founder of Ethereum.
Ethereum says he is not a co-founder.
Its hard to make sense of the investment history of Global Blockchain Technologies from its public disclosure documents. It represented that it paid US$2 million to buy all of the pre-ICO Kodak coins in 2018, and represented that it owns 12.8% of Toronto based Hyperion Crypto Exchange Inc., which it represented to investors is licensed by the SEC. It also represented that it invested $5 million into Hyperion Crypto Exchange Inc., and represented to investors that the Exchange was launching in association with a major government.
Hyperion Crypto Exchange Inc. appears to be the same entity as Hyperion Technologies, also based in Toronto. The CEO of those two entities is the same and its CFO was the CFO of Global Blockchain Technologies, and the payments to Hyperion therefore may have been non-arms length. According to this article, Hyperion acquired assets from the ICO company Vanbex.
In August 2018, Hyperion (the exchange entity) represented that it was licensed in the US as an ATS (alternative trading system) and that it had a positive relationship with the Ontario Securities Commission, which suggests to the public that it is government regulated as a digital currency exchange, when it may not be.
Entities registered with the SEC as an ATS are here – Hyperion is not listed with the SEC.
Recently, Polymath and Nerayoff joined forces on an Alchemist accelerator to advise Blockchain startups, and Nerayoff is listed as an advisor with many other Toronto-based Blockchain companies, many of whom appeared with him at a Canadian ICO Conference held in 2018 on an offshore tax haven island, on YouTube below, in which Nerayoff was featured.
(Since we wrote this post, the page for the Alchemist accelerator has been removed).
In the video below, Nerayoff is interviewed and describes his role as an inventor of what he calls “token ICOs”.
(Since we wrote this post, the Canadian ICO Conference organizer removed the video of Nerayoff, below).