Ethereum Adviser Steven Nerayoff Files $100M Lawsuit Against Covington & Burling Over Mishandling Defense in Extortion Case

Steven Nerayoff, an early Ethereum adviser and prominent figure in the blockchain community, has filed a $100 million lawsuit against law firm Covington & Burling, alleging negligence in their handling of his defense in a 2019 extortion case. 

The lawsuit, filed on Sept. 6 in the New York County Supreme Court, claims that Covington’s legal team failed to present critical evidence that could have potentially led to an early dismissal of the charges.

Allegations of Mishandled Evidence

Nerayoff's lawsuit centers around advice given by Covington attorney Alan Vinegrad, who, according to Nerayoff, recommended that videos, emails, and other communications related to “negotiations with the alleged victims” not be turned over to U.S. prosecutors. These materials, Nerayoff claims, would have proven that his actions were "entirely lawful." 

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In 2019, Nerayoff and an associate from his blockchain consulting firm, Alchemist, were arrested and charged with extorting a cryptocurrency startup. However, after submitting the exculpatory evidence in June 2022, Nerayoff’s charges were dismissed by May 2023. He argues that if his defense team had provided this evidence earlier, the entire case could have been avoided.

Legal Fallout

Nerayoff alleges that Covington & Burling withdrew from his defense after he was formally indicted in January 2020, leaving him to battle the legal system for three years at a cost of over $1 million in legal fees. His complaint states that the firm’s decision not to present the crucial evidence left him embroiled in a protracted legal fight, damaging his professional standing and causing significant financial loss. 

Covington & Burling has responded to the lawsuit, with a spokesperson stating that the "lawsuit lacks merit" and that the firm intends to defend against the claims "vigorously."

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The $100 million lawsuit against Covington is not the only legal action Nerayoff has taken in recent months. Earlier this year, he filed a $9.6 billion lawsuit against the U.S. government, claiming malicious prosecution and mishandling of the extortion case. Additionally, in July, he launched a $10 million defamation lawsuit against Tyler Fayard, known as "Boring Sleuth" on social media, for allegedly spreading false information about him online.

Steven Nerayoff Suffers Reputational and Financial Damage

Nerayoff’s attorney, Romeo Salta, claims that as a result of the indictment, Nerayoff was unable to conduct business within the cryptocurrency space, losing contracts and missing opportunities. Salta is seeking a settlement of no less than $100 million, with the final amount to be determined at trial. According to the complaint, Nerayoff’s professional reputation and career were severely harmed during the extended legal process, further amplifying his financial losses.