The DOJ’s Puzzling Case Against Former Ethereum Advisor Steven Nerayoff

In a move that has left the cryptocurrency community buzzing, famous crypto influencer Mr. Huber took to Twitter to express his disbelief over the recent legal proceedings against Steven Nerayoff, a former Ethereum advisor. “This stinks to high heaven,” Huber tweeted, addressing the U.S. Department of Justice’s (DOJ) seemingly paradoxical stance in the case.

A Brief Background:

On January 10, 2020, Nerayoff and Hlady were charged with Hobbs Act Extortion Conspiracy, among other allegations, for extorting money and Ethereum (ETH) from a Seattle-based cryptocurrency business called Company 1. These charges covered their dealings with the company, leading up to its ICO in November 2017, and a 10,000 ETH loan from Company 1 in March 2018.

Michael Hlady pled guilty and openly confessed his agreement with Nerayoff to extort Company 1. This act usually would seal the fate of a co-defendant, especially when the plea involves admitting to conspiracy.

But the DOJ made an extraordinary move. On February 13, 2023, the department filed a motion that aimed to dismiss the indictment against Nerayoff. 

Nerayoff Strikes Back:

Steven Nerayoff didn’t sit quietly, either. He took to Twitter to present his view that the SEC and the government attempted to co-opt the cryptocurrency industry. He also mentioned he was one of the very few people who had a list of ETH contributors, subtly hinting at the leverage he holds.

To fuel the fire, Nerayoff leaked email conversations dating back to July 21, 2014, which involved Ethereum co-founders Vitalik Buterin and Joseph Lubin. Tagging them as “#CryptoJudas” and “#CrookedElbowJoe” respectively, he appeared to assert that his contributions to Ethereum were being discredited.

Unanswered Questions:

• Why would the DOJ reject its case despite having a co-defendant’s guilty plea?
• What are the broader implications of Nerayoff’s potential “contributor list”?
• Is there a more extensive conspiracy in the Ethereum and wider crypto community?

Is Ethereum facing a karmic reckoning? Long perceived to have received a regulatory “free pass” compared to other cryptocurrencies like XRP—which faced intense scrutiny despite its arguably superior technology—Ethereum now grapples with its controversies, including scalability issues and governance dilemmas. Only time will tell if this is a small bump in the road or a sign that Ethereum’s luck is running out.