A cryptocurrency entrepreneur has been charged with extorting an unnamed, Seattle-based digital asset startup. Steven Nerayoff stands accused of threatening to “wreck the company” should the firm not meet his demands of more than $8 million.

Nerayoff was reportedly brought on by the company as an advisor to help form partnerships and attract investors. He was due to be rewarded handsomely for his work, but reportedly ended up demanding a far larger payment accompanied by threats.

Entrepreneur Faces Up to 20 Years for Cryptocurrency Startup Exploitation

According to a report in the Seattle Times, early cryptocurrency entrepreneur and advocate Steven Nerayoff agreed to help the Seattle-based startup, referred to in the federal charges as “Company 1”, in 2017. Nerayoff was tasked with writing the firm’s whitepaper and helping to craft its public image. He was due to receive a massive 22.5 percent of both the total number of tokens issued by the company and the same percentage of any funding raised.

Given that the firm received $16 million from seed funding, Nerayoff should have been paid $3.7 million for his work. However, he reportedly demanded almost half of all the seed money – $8.75 million under the threat that he would “sabotage the crowdsale, generate negative press … and use his contacts with influential people to ‘destroy’” the company. The startup reportedly paid up an extra $3.78 million in Ether (ETH) tokens to Nerayoff at this time.

Later, the complaint states that Nerayoff upped his demands. During the cryptocurrency market crash of 2018, he demanded the firm pay him another 350 million tokens in its own cryptocurrency. He then asked for a loan of $4.45 million in March 2018, which was eventually paid. Nerayoff reportedly failed to return any of the borrowed funds.

The complaint states that he enlisted the help of his “operations guy”, Michael Hlady, to make further demands. Hlady has a suitably intimidating past, having reportedly served in the Irish Republican Army, the National Security Agency, the Central Intelligence Agency, and the Federal Bureau of Investigations. Amongst other efforts at exortion, Hlady is believed to have made threats against the family of the chief operating officer at Company 1. He reportedly said that he knew which school her daughter attended in a threatening context.

Both Nerayoff and Hlady were arrested for the reported extortions on Tuesday of this week. If found guilty, they could face up to 20 years in prison. For now, however, both are out on bail – Nerayoff for $750,000 and Hlady for $50,000.

Nerayoff’s legal representation has reportedly refuted the charges, arguing that Company 1 owed their client money and, rather than pay up, they had simply fabricated the story presented to the federal court. NewsBTC will bring you more on this story as it develops.

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