Individual Pleads Guilty in Brooklyn Federal Court to Extorting Cryptocurrency from Startup Company
Earlier today, in federal court in Brooklyn, Michael Hlady pled guilty before United States Chief District Court Judge Margo K. Brodie to conspiring to extort a startup company for millions of dollars in the cryptocurrency Ether (ETH). When sentenced, Hlady faces up to 20 years in prison, as well as a fine.
Mark J. Lesko, Acting United States 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,” stated Acting United States Attorney Lesko. “This Office and its law enforcement partners are committed to protecting businesses from extortion in whatever manner it is perpetrated.” Mr. Lesko thanked the Federal Bureau of Investigation, New York Field Office, for their outstanding work on the case.
As set forth in court filings and at today’s proceeding, the victim company (“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 told the Company’s 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 his co-conspirator Steven 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 to Nerayoff.
Nerayoff has entered a plea of not guilty to extortion charges and is awaiting trial.
The government’s case is being handled by the Office’s Business and Securities Fraud Section. Assistant United States Attorneys Mark E. Bini and Andrey Spektor are in charge of the prosecution.
MICHAEL HLADY (also known as “Michael Peters”)
East Greenwich, Rhode Island
E.D.N.Y. Docket No. 20-CR-8 (MKB)