McAfee Antivirus Software Founder Indicted in $13 Million Crypto Scheme

McAfee’s Twitter endorsements for cryptocurrency tokens, including DogeCoin and Verge, netted him more than $2 million in illicit profits from a “pump and dump” investment scheme, prosecutors allege. 

This file photo from Sept. 9, 2015, shows internet security pioneer John McAfee. (Todd J. Van Emst/Opelika-Auburn News)

MANHATTAN (CN) — Antivirus software pioneer John McAfee was indicted Friday on seven criminal counts for a $13 million “scalping” fraud and money laundering conspiracy in connection with two cryptocurrency investment schemes.

McAfee, the 75-year old founder of the eponymous McAfee antivirus software company, was indicted on criminal charges brought in the Southern District of New York on Friday along with Jimmy Gale Watson Jr., a former bodyguard-turned-executive adviser of McAfee’s cryptocurrency team. 

“As alleged, 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,” Manhattan U.S. Attorney Audrey Strauss said in a statement on Friday.  

The 38-page criminal complaint unsealed on Friday alleges McAfee and Watson exploited McAfee’s 780,000 strong Twitter following to artificially inflate prices of so-called “altcoins” by recommending those commodity tokens online to would-be investors without disclosing that they had taken investment positions in those commodities with the intention of selling them in the short term. 

Federal prosecutors allege that between December 2017 and January 2018, McAfee, Watson, and other McAfee team members collectively earned over $2 million in illicit profits from their altcoin “scalping” scheme, while the long-term value of the recommended altcoins purchased by investors plummeted as of a year after the promotional tweets.   

“As alleged, McAfee and Watson used social media to perpetrate an age-old pump-and-dump scheme that earned them nearly two million dollars,” FBI Assistant Director William Sweeney Jr. said in a statement Friday morning.  

Recurring “Coin of the Day” or “Coin of the Week” Tweets from McAfee’s account promoting altcoin tokens, such as Verge, Reddcoin, and DogeCoin, included “false and misleading representations and omissions,” federal prosecutors allege. 

According to the indictment, McAfee and Watson also used Twitter to tout the sale of digital tokens on behalf of other altcoin issuers without disclosing to investors the $11 million in compensation they received from startup businesses to promote those initial coin offerings. 

The anti-touting provisions of Section 17(b) of the Securities Act of 1933 make it unlawful for any person to publish any communication in interstate commerce that describes a security (regardless of whether the communication purports to offer the security for sale) in exchange for consideration from an issuer, underwriter, or dealer of the security “without fully disclosing the receipt, whether past or prospective, of such consideration and the amount thereof,” the criminal complaint notes in connection to the ICO touting counts. 

Prosecutors also alleged McAfee used a California digital asset exchange to liquidate the digital asset proceeds of the ICO touting scheme into millions of dollars in U.S. currency, that was then transferred to a bank in Tennessee via transactions routed through an intermediate bank in New York. 

Watson, the 40-year-old alleged co-conspirator, was arrested last night in Texas. 

Meanwhile, McAfee was already detained in Spain on separate criminal charges filed by the U.S. Department of Justice’s Tax Division last October. 

From behind bars in Spain, the tech-savvy Libertarian still maintains his aforementioned active presence on Twitter, which includes his quips on taxpaying, details of his Spanish imprisonment and piecemeal witticisms from a forthcoming memoir. 

Both men are charged with one count of conspiracy to commit commodities and securities fraud; one count of conspiracy to commit securities and touting fraud; two counts of conspiracy to commit wire fraud and two counts of substantive wire fraud; and one count of conspiracy to commit money laundering. 

The United States Securities and Exchange Commission and Commodity Futures Trading Commission have filed civil charges against McAfee and Watson in separate parallel enforcement actions. 

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