Will John McAfee be jailed? Antivirus pioneer charged with securities fraud for 'pump-and-dump' crypto scheme
McAfee and his team allegedly bought large amounts of cheap cryptocurrency altcoins, then aggressively promoted them online with 'false and misleading endorsement tweets' to artificially inflate their market prices
John McAfee and his associate were accused by Federal prosecutors on Friday, March 5, of orchestrating fraudulent schemes to rake in millions of dollars from cryptocurrency investors. As per FBI Assistant Director William F. Sweeney Jr, pioneer software founder and his “cryptocurrency team” advisor Jimmy Watson allegedly engaged in an “age-old pump-and-dump scheme.”
Allegedly, they earned nearly $2 million by urging Twitter followers to invest in cryptocurrencies like Reddcoin and Dogecoin, then selling off their own holdings as the price rose. “McAfee and Watson exploited a widely used social media platform and enthusiasm among investors in the emerging cryptocurrency market to make millions through lies and deception,” said US Attorney Audrey Strauss in a statement.
“The defendants allegedly used McAfee’s Twitter account to publish messages to hundreds of thousands of his Twitter followers touting various cryptocurrencies through false and misleading statements to conceal their true, self-interested motives,” Strauss added.
As per CNBC, McAfee and his team allegedly bought large amounts of cheap cryptocurrency altcoins, then aggressively promoted them online with “false and misleading endorsement tweets” to artificially inflate their market prices. “McAfee Team members collectively earned more than $2 million in illicit profits from their altcoin scalping activities,” the Department of Justice alleged.
A Verge report said that they allegedly ran their scheme between December 2017 to October 2018, where McAfee used his verified Twitter account, which currently has around 1 million followers, to recommend a “Coin of the Day” or “Coin of the Week.” McAfee allegedly claimed to have no stake in these altcoins but would buy large quantities beforehand using bitcoin, then offload them again after his followers had driven up the price.
Can McAfee go to jail?
As per reports, McAfee and Watson have been charged with commodities and securities fraud conspiracy, wire fraud conspiracy, wire fraud, touting fraud conspiracy, and money laundering conspiracy.
The U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission have filed separate civil charges against McAfee and Watson. As per the Verge, McAfee and Watson are facing seven charges, each count carrying between five and 20 years in prison.
"McAfee leveraged his fame to make more than $23.1M in undisclosed compensation by recommending at least seven initial coin offerings or ICOs to his Twitter followers," the SEC said, adding, "McAfee's recommendations were 'materially false and misleading,' in that he tried to sell 'virtually worthless' cryptocurrency tokens by encouraging investors to buy the securities without disclosing his own holdings."
"Potential investors in digital asset securities are entitled to know if promoters were compensated by the issuers of those securities," Kristina Littman, the SEC's cyber unit chief said. "McAfee, assisted by Watson, allegedly leveraged his fame to deceptively touting numerous digital asset securities to his followers without informing investors of his role as a paid promoter."