John McAfee Indicted for ICO Manipulation, Securities Fraud
Today, the United States Attorney for the Southern District of New York, William F. Sweeney, announced the unsealing of a seven count indictment charging John David McAfee, founder of McAfee, and Jimmy Gale Watson, an executive advisor to McAfee, with pump-and-dump schemes, as well as initial coin offering (ICO) touting schemes.
Watson was arrested on March 4, 2021, in Texas. McAfee has been in Spanish custody since October 2020, after being arrested on U.S. tax evasion charges (October 2020 indictment), and is awaiting extradition to the United States. He is also being sought by authorities in Belize for questioning regarding the murder of his neighbor, Greg Faull, which occurred in November 2012.
With this indictment, McAfee continues his fall from grace; at the height of Silicon Valley’s go-go era, the company which bears his name once sat firmly at the vanguard of cybersecurity.
McAfee has been active in cryptocurrency, as evidenced by the October 2020 indictment (United States District Court for the Western District of Tennessee) for failure to pay his income tax on his earnings derived from his speaking engagements (2014-16); rights to his life story for film documentary (2015-16); consultant work (2016-18) and through his promotion of cryptocurrencies (2017-18).
The latter portion of the 2020 indictment appears to be tangentially related to the most recent indictment.
McAfee March 2021 Indictment
Pump and Dump – McAfee and Watson are charged with purchasing large quantities of publicly traded cryptocurrency altcoins at “inexpensive market prices.” Then McAfee would, via his Twitter account “Official McAfee,” would promote the value of these altcoins to investors to inflate the price. It is alleged they pocketed over $2 million for their efforts from December 2017 through January 2018.
The criminal complaint contains the result of the FBI’s review of Skype communications between McAfee and various team members. One of the targeted stocks is identified as “Verge” (aka XVG).
McAfee’s Pump-and-Dump M.O. Explained
On December 13, 2017 McAfee transferred $15,000 to one of his team members, and directed one-third of the amount be used to purchase XVG tokens at market price. Then, from Dec. 13 to 17, McAfee endorsed the XVG tokens on his Twitter account. Interestingly, McAfee was called out in a Tweet for pumping XVG, and he responded denying he owned any XVG.
I own no XVG. I live how you shallow folks cannot distinguish between someone who shamelessly speaks his mind- because it's true – and someone with an ulterior motive. You know absolutely nothing about me if you believe I have the time to waste spewing garbage.
— John McAfee (@officialmcafee) December 15, 2017
McAfee also engaged in direct, one-on-one discussions, via text messages, with investors concerning the XVG token opportunity, denying any ownership in all instances.
Then on the Dec. 17, after four days of pumping XVG, the team member was instructed to dump XVG, and McAfee et al. garnered $30,000 profit. The complaint notes that the price for XVG tokens fell 85% in the ensuing year.
McAfee proceeded to bait the hook with his “Coin of the day” Tweets, in which he would identify cryptocurrency altcoins investment opportunities for his followers.
Beginning tomorrow, I will each day talk about a unique altcoin. Most of the 2,000 coins are trash or scams. I've read every white paper. The few I'm connected to I will tell you. The rest I have no position in. These coins will change the world. You can support
— John McAfee (@officialmcafee) December 20, 2017
Altcoins identified by the DoJ as part of his pump-and-dump scheme include: Electroneum (ETN), Burstcoin (BURST), DigiByte (DGB), Reddcoin, (RDD), Humaniq (HMQ), Tron (TRX), Factom (FCT), Dogecoin (DOGE), Stellar Lumen (XLM), Syscoin (SYS) and Ripio Credit Network (RCN) tokens.
Initial Coin Offerings
McAfee and Watson also are charged with, again, using the power of McAfee’s Twitter account to “tout the fundraising events” of the ICOs. What McAfee neglected to mention is that he was compensated by the ICO issuers, and that a large percentage of every ICO investment was skimmed off the top, like rich cream, to compensate McAfee and others without disclosing that compensation to the unwitting investors. For their efforts, the Department of Justice estimates that McAfee et al. pocketed approximately $11 million by touting seven ICOs from December 2017 through February 2018.
I do not. I merely sift through the mass if tokens to find the gems and share them. It's in everyone's interest to support coins that improve our lives.
— John McAfee (@officialmcafee) December 20, 2017
When queried, McAfee denied receiving any compensation; instead suggesting his acumen was responsible for his selection and that these coins would “improve our lives,” – well, at least McAfee’s.
McAfee and Watson face many years in prison, if convicted. Current sentencing for the charges includes:
- Five years – Conspiracy to commit commodities and security fraud;
- Five years – Conspiracy to commit securities and touting fraud;
- 20 years each – Two counts of conspiracy to commit wire fraud;
- 20 years each – Two counts of substantive wire fraud; and
- 10 years – Conspiracy to commit money laundering.
Ironically, the most recent tweet from McAfee’s twitter account, on Feb. 27, is a request for a U.S. attorney with experience in extradition law and cryptocurrencies.