John McAfee indicted on crypto fraud charges
This is only the first case brought by the CFTC for a manipulative scheme involving digital assets
The Commodity Futures Trading Commission has filed a complaint in the State of New York against John McAfee and his former employee Jimmy Gale Watson for “engaging in a manipulative and deceptive digital asset “pump-and-dump” scheme”.
McAfee and Watson allegedly accumulated positions in digital assets and promoted the digital assets through social media as valuable long-term investments only to then sell the assets after their prices rose sharply following McAfee’s deceptive endorsements.
The pump-and-dump scheme involved verge (XVG), dogecoin (DOGE), and reddcoin (RDD) and resulted in profits in excess of $2 million, according to the CFTC.
The CFTC announced this is only the first case brought by the regulator for a manipulative scheme involving digital assets. There may be more to come in the near future.
Acting Director of Enforcement Vincent McGonagle, said: “Manipulative and fraudulent schemes, like that alleged in this case, undermine the integrity and development of digital assets and cheat innocent people out of their hard-earned money. Financial innovation is constantly breaking new ground, and the CFTC’s enforcement efforts must keep up. We will always act to hold fraudsters and manipulators accountable for misconduct.”
McAfee and Watson were indicted on charges of conspiracy to commit commodities and securities fraud, wire fraud, wire fraud conspiracy, conspiracy to commit securities touting fraud, and money laundering. Both individuals are also defendants in a civil enforcement action brought by the Securities and Exchange Commission.
The SEC’s complaint filed a year ago alleges that McAfee leveraged his fame to make more than $23.1 million U.S. Dollars (“USD”) in undisclosed compensation by recommending at least seven “initial coin offerings” or ICOs to his Twitter followers.
“The ICO at issue involved the offer and sale of digital asset securities and McAfee’s recommendations were materially false and misleading for several reasons.
“McAfee did not disclose that he was being paid to promote the ICOs by the issuers (the companies selling the securities in the ICOs). Promoting a security without disclosing that you are being paid to do so is unlawful “touting” and violates the federal securities laws.
“The ICOs McAfee touted raised at least approximately $41 million and McAfee made approximately $23.2 million in secret compensation for his touts. When directly asked if he was being paid for these promotions, McAfee lied to investors by falsely denying he was being paid by the issuers”, the complaint stated.