Blockchain consulting firm allegedly extorted crypto start-up with threats to hijack its initial coin offering

Blockchain consulting firm allegedly extorted crypto start-up with threats to hijack its initial coin offering

September 18, 2019
  • A New York-based blockchain consulting firm allegedly extorted a Seattle-based crypto start-up with threats to hijack its initial coin offering, in a case announced Wednesday by the Eastern District of New York prosecutor. 
  • The anonymous Seattle start-up signed an agreement with Maple Ventures, an offshot of Alchemist LLC, which purported to be a blockchain consulting firm and "accelerator"  based in New York, according to a complaint filed by the Eastern District Sept. 17. 
  • The allegations of threats, fraud and extortion are a dark window into the fraud and strife that have dogged the cryptocurrency marketplace in recent years. 

A New York blockchain consulting firm allegedly extorted a Seattle crypto start-up with threats to hijack its initial coin offering, in a case announced Wednesday by the Eastern District of New York prosecutor.

The anonymous Seattle start-up signed an agreement with Maple Ventures, an offshot of Alchemist LLC, which purported to be a blockchain consulting firm and "accelerator" based in New York, according to a complaint filed by the Eastern District Sept. 17.

The allegations of threats, fraud and extortion are a dark window into the fraud and strife that have dogged the cryptocurrency marketplace in recent years.

The start-up's owners, referred to as John and Jane Doe in the complaint, hired Maple Ventures to revise corporate paperwork, add advisors and strategic partnerships and help facilitate a "crowdsale" of their ethereum-based coin in July 2017, according to the complaint. A crowdsale is a type of crowdfunding specific to cryptocurrencies.

Maple Ventures was to be paid in a percentage of the cryptocurrency tokens sold and funds raised by the anonymous company in the offering.

Instead, Maple Ventures embarked on a campaign of extortion, according to prosecutors.

Hlady and Narayoff did not immediately respond to requests for comment, and it was unclear if they were represented by counsel.

In the fall of 2017, Maple Ventures' CEO Steven Narayoff and another executive, Michael Hlady, allegedly contacted the defendants and demanded their start-up agree to let him keep 30,000 ethereum, worth approximately $8.75 million, that Maple Ventures had been holding for the coin's pre-sale, otherwise he would "sabotage the crowdsale, generate negative press for [their company] and use his contacts with influential people to 'destroy' [them]."

The complaint says Maple Ventures later demanded billions more in cryptocurrency, and physically threatened one of the start-up's principals, who had been stranded in New York due to a snowstorm.

The defendants are being arraigned in Eastern District Court later on Wednesday.

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