An East Greenwich man, Michael Hlady, 48, pleaded guilty in Brooklyn federal court Monday to conspiring to extort millions in cryptocurrency from a Seattle-based startup in what officials called an “old-fashioned shakedown, to be paid off with 21st century cryptocurrency.” Hlady faces up to 20 years in prison and a fine.
He was arrested in September 2019 in Rhode Island; his alleged partner in the scheme, Steven Nerayoff of Great Neck, N.Y., was arrested in New York.
Acting U.S. Attorney for the Eastern District of New York announced the guilty plea.
“Hlady and his co-conspirator used strong-arm tactics to shake down a startup company of cryptocurrency and will now face punishment just like anyone else who extorts a business,” Lesko said.
According to court filings, the targeted company was a startup mobile-based business that issued cryptocurrency tokens such as Ether as loyalty rewards for generating user traffic to its clients’ products. To raise capital, the company planned to conduct an Initial Coin Offering (“ICO”) in November 2017. In connection with the ICO, Hlady – using the name “Michael Peters” – told company executives that he had been a part of the Irish Republican Army, the National Security Agency, the Central Intelligence Agency and the Federal Bureau of Investigation; that he had been shot at and had killed people; and that he had “taken down” a head of state.
In March 2018, Hlady and Nerayoff issued threats to company executives that included destruction of the company if it did not agree to demands for additional funds and company tokens. On March 28, 2018, Hlady sent a text message to a company executive stating, in part, “I promise I will destroy your community” if the company did not comply with the demands. As a result of this threat, the company transferred 10,000 ETH (at the time, the equivalent of $4.5 million) to Nerayoff.
Nerayoff has entered a plea of not guilty and is awaiting trial.