Eccentric antivirus millionaire John McAfee is once again facing federal charges – this time over a pair of alleged cryptocurrency schemes that raised more than $ 13 million for himself and his accused group of scammers, including his ex-security guard turned CEO.
Manhattan federal prosecutors announced on Friday that 75-year-old McAfee was being held in Spain on the basis of separate criminal charges by the Department of Justice’s tax department, while authorities reported his alleged accomplice, 40-year-old Jimmy Gale Watson Jr., oppressed in Texas.
It is the last problem for the reclusive founder of the anti-virus software of the same name. In October, McAfee was charged with federal tax evasion and intentional failure to file tax returns from 2014 to 2018 and charged with hiding assets including his yacht and property in other people’s names. At the time, prosecutors in Tennessee claimed he made millions promoting cryptocurrencies and even selling his life story for a documentary.
The new indictment states that McAfee, Watson and other members of McAfee’s “so-called cryptocurrency team” are engaged in “scalping” or a “pump and dump” scheme using McAfee’s Twitter handle @officialmcafee. They face charges including commodity and securities fraud conspiracy, wire fraud conspiracy, wire fraud and securities conspiracy, and promoting fraud.
According to the FBI, McAfee and his team bought dozens of publicly traded altcoins – an alternative to bitcoin – for low market prices, then published false and misleading tweets via McAfee’s Twitter to “artificially inflate” their market price. McAfee and his alleged henchmen then jointly sold their investments for more than $ 2 million. The fraudsters reportedly scalped at least 12 publicly traded altcoins, which qualify as commodities or securities under federal law.
While McAfee and Watson made “illegal profits,” the indictment adds, the long-term value of the altcoins bought by investors fell, “from a year after the promotional tweets.” Prosecutors say McAfee falsely promised to reveal during the settlement whether he had a significant stake in altcoin in his tweets and public statements.
In a second plan, McAfee reportedly advocated “initial coin offers,” without disclosing that the startups behind the fundraisers paid McAfee and his team for the promotional tweets with a large portion of the proceeds from investors.
The bizarre global computer programmer – once suspected of murdering a Belize neighbor but never charged – started ramping up his Twitter profile in the years before the two plans. Many of McAfee’s 784,000 followers were cryptocurrency investors, the indictment alleges.
In his Twitter bio, McAfee described himself as follows: “Iconoclast. Lover of women, adventure and mystery. Founder of McAfee Anti-virus. His location is linked as, “Wherever I am.”
While the indictment doesn’t identify altcoin’s offering, McAfee tweeted about multiple ICOs for emerging startups, including a healthcare platform called Docademic and the UK-based female-only taxi Pink Taxi. “The possibilities are endless when free healthcare is a reality. Docademic ICO ends on Sunday, not without monumental success! One of the best ICOs I’ve seen, ”he tweeted in April 2018.
“For the women in crypto, the pinktaxi.io ICO is the first security coin to help protect women in male-dominated societies. One if [sic] the most promising ICOs since Docademic of Bezop, ”McAfee wrote in June 2018. The tweet featured a video of himself and a woman claiming to be an investor in Pink Taxi.
The indictment also cites an alleged co-conspirator revealed only as “McAfee Team Member-1,” who allegedly ordered McAfee to buy large quantities of a specific altcoin that he would then underwrite and sell on Twitter to make a profit. .
Several investors who took the bait lived in New York’s Southern District, where Team Member-1 attempted to open an account with a digital asset exchange so McAfee could liquidate his proceeds from the alleged crypto conspiracy.
But in January 2018, the cryptocurrency exchange turned down Team Member-1’s application, prompting the man to fire an email identifying himself as an “employee of John McAfee,” threatening to sue the rejection.
Prosecutors say McAfee, Watson and their helpers have also orchestrated a second plan by using McAfee’s Twitter to promote “ initial coin offers, ” or a fundraising method that startups use similar to an initial public offering, except investors often use new digital ” tokens’. in exchange for established cryptocurrency such as Bitcoin.
The McAfee team should have known that federal securities laws require them to disclose any fees from ICO issuers, the indictment said. Indeed, in November 2017, the US Securities and Exchange Commission specifically warned, “Any celebrity or other person who promotes a virtual token or coin that is a security must disclose the nature, size and amount of compensation received in exchange for the promotion. to announce. “
The alleged scammers collected more than $ 11 million in undisclosed compensation, which they certainly hid from investors.
McAfee lived in Lexington, Tennessee, during the alleged scalping and ICO schemes, which took place from December 2017 to October 2018.
Watson started working as a private security guard for McAfee in November 2017 and moved into the tech pioneer’s home in Tennessee. McAfee would soon promote Watson from security guard to “ executive adviser ” and later to CEO of the McAfee team before leaving in October 2018, the indictment said.
In January 2018, McAfee opened an account with his own name at a cryptocurrency exchange in California with help from Watson and Watson’s then-wife.
According to court documents, McAfee and Watson had Watson’s former husband use McAfee’s exchange account in California to liquidate the proceeds from the ICO recruiting scheme in millions of dollars in U.S. currency before more than a million dollars was passed through a New York financial institution. transferred and directed. in a bank account registered with McAfee in Tennessee.
The FBI says that in April 2018, McAfee and Watson ordered the woman to apply online to open an account with a New York exchange so that the men can liquidate their ill-gotten cryptocurrency.
If McAfee and Watson are convicted on all counts, they will be behind bars for 60 years.
“As alleged, McAfee and Watson used a widely used social media platform and enthusiasm among investors in the emerging cryptocurrency market to make millions through lies and deception,” US attorney Audrey Strauss of Manhattan said in a statement. “The defendants reportedly used McAfee’s Twitter account to publish messages to hundreds of thousands of his Twitter followers promoting various cryptocurrencies through false and misleading statements to conceal their true self-important motives.”
“Investors should be wary of social media recommendations about investment opportunities,” Strauss concluded.