Feds accuse John McAfee of fraud against pumping and dumping cryptocurrency

Federal prosecutors have sued John McAfee, the eccentric cybersecurity, in the area of ​​cybersecurity for securities and wire fraud for misleading investors at the height of the recent boom in cryptocurrency. In late 2017 and early 2018, McAfee urged its hundreds of thousands of Twitter followers to invest in a number of obscure cryptocurrencies. Prosecutors say he did not disclose his own financial interest in the signs – and in some cases lied about it.

McAfee has been in custody in Spain since his arrest at an airport in Barcelona last October. He is already facing extradition to the United States based on tax evasion charges; the self-described Libertarian has not filed a tax return for several years. Now he, along with bodyguard Jimmy Watson, who allegedly helped McAfee carry out some of his pump-and-shower schemes, will face additional charges of securities and wire fraud.

The criminal charge covers much of the same grounds as a civil lawsuit filed by the Securities and Exchange Commission during its arrest last October.

“I do not pump for my gain”

Prosecutors say McAfee was involved in two types of illegal schemes. In one, he would buy an obscure cryptocurrency, discuss it on Twitter and download it at a higher price. In other cases, he would agree to trade a new cryptocurrency sale on Twitter in exchange for a cut in returns.

Buying and promoting cryptocurrencies is not necessarily illegal in itself. According to prosecutors, the problem is that McAfee tried to increase the effectiveness of his underwriting by falsely claiming that he had no financial interest in his recommendation. The government says its actions have violated federal fraud laws.

Prosecutors say, for example, that around December 20, 2017, McAfee bought more than $ 100,000 from the obscure cryptocurrency Electroneum (ETN). The next day, he tweeted that he had received ‘more than one DM’ to tell him that Electroneum was ‘the holy grail of the crypto-currency’.

When someone asked McAfee if he himself had invested in ETN, McAfee denied it.

“I have no ETC,” the indictment reads. “I’m not pumping for my gain. I’ll show you the incredible value of supporting a coin that will change the world.”

Prosecutors say McAfee actually wash pump for his gain. The price of ETN rose 40 percent in the hours after McAfee tweeted about it. McAfee liquidated its shares and made a good profit. Since then, ETN’s value has fallen by nearly 90 percent.

In another case, also in December 2017, the creator of a new cryptocurrency called SETHER promised to pay McAfee 30 percent of the proceeds from the SETHER ICO. McAfee was also supposed to get a “significant percentage” of the custom SETHER tokens. In return, McAfee agreed tweet that the coin was, among other things, ‘the first sign that opened the door to a new paradigm of social marketing’.

On Twitter, someone asked him if he was paid to promote tokens like SETHER.

“I do not,” he said reacted. ‘I just sift through the mist [of] signs to find the jewels and share them. “Although he claimed to have ‘advised them on cyber security’.

On the same day, McAfee wrote privately to the founder of SETHER: “Take my name off your site for the next few weeks,” he suggested. “I want to be able to use my Twitter with people on the assumption that I have no relationship with you. If you remove my name now, your sales will add at least a million dollars.”

The following month, when he sent an initial coin offering for a token called PODONE, McAfee became indignant at the allegations that he was being paid to promote cryptocurrencies:

In total, federal prosecutors say McAfee earned more than $ 13 million through misleading cryptocurrency promotion schemes.

Prosecutors say McAfee knew he was breaking the law

Just a few weeks earlier, the Securities and Exchange Commission had explicitly warned that celebrities could break the law if they promote a cryptocurrency offering without disclosing that they have a financial interest in it.

“Any celebrity or other person who promotes a virtual token or coin as security must disclose the nature, extent, and amount of compensation received in exchange for the promotion,” the SEC wrote. According to federal prosecutors, McAfee did the opposite. And the government claims McAfee knew he was breaking the law. Prosecutors say McAfee participated in direct conversations with direct messages in which the SEC rules were discussed.

In a speech on December 16, McAfee claims that he was working on a new cryptocurrency called McAfee Coin – as far as I can see, the project never came to fruition.

“I’m actually trying to follow the letter of the law,” McAfee said. He said he wanted the McAfee currency to be a legal entity that the SEC could not enter a year later, and said Mr. McAfee, you’re arrested. It will happen with many signs, I promise you. ‘

In a December tweet‘McAfee’s wife said life in jail’rapidly deteriorating “McAfee’s 75-year-old body and has “virtually destroyed his health. He has now lost almost £ 30 and has internal problems.”