In the evening December 20, 2017, controversial cybersecurity pioneer John McAfee tweeted that he would embark on some sort of educational blitz. “Starting tomorrow, I’ll be talking about a unique altcoin every day,” McAfee wrote. “Most of the 2,000 coins are garbage or scam. I’ve read every white paper. The few that I am associated with I will tell you. For the rest I have no function. “It’s that last bit that caught the attention of the Justice Department.
On Friday, the U.S. Southern District law firm of New York City sued McAfee and executive assistant Jimmy Watson on multiple charges involving two alleged cryptocurrency schemes. (McAfee was previously indicted in October on separate tax evasion charges.) According to court documents, McAfee and his associates raised a combined $ 13 million between the two efforts, both of which relied on using McAfee’s popular Twitter account to create niche cryptocurrencies. push or promote initial coin offers without disclosing that it would benefit, either through investment gains or promotional fees.
“As alleged, McAfee and Watson took advantage of 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 press release. “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.”
Pump yourself up
The altcoin conversations that McAfee was promoting were a purported part of that deception. In mid-December 2017, he reportedly instructed an employee to purchase approximately $ 5,000 worth of tokens in XVG, otherwise known as Verge. That same day, McAfee on Twitter described XVG, along with more established tokens such as Monero and Zcash, as a coin that “ cannot lose. ” Two days later, when a Twitter user suggested that McAfee had “pumped” XVG and artificially increased its value to sell high, McAfee responded with indignation. “I don’t own an XVG,” he wrote“I’m alive [sic] how shallow people cannot distinguish between someone who is shamelessly expressing his opinion – because it is true – and someone with ulterior motives. You know absolutely nothing about me if you think I have the time to waste rubbish wasting rubbish. “
XVR was up 500 percent in the four days after McAfee’s first tweet. McAfee, prosecutors say, sold near the top, with a nice profit of $ 30,000.
That success seems to have inspired what McAfee would call his “Coin of the Week” series. The same day he announced his journey to “unique altcoins” on Twitter, McAfee allegedly instructed an employee to put $ 100,000 worth of bitcoin into Electroneum tokens. On December 21, 2017, he adopted tweeted a glowing bulleted report on ETN, including a claim that he had “more than one DM calling Electroneum the holy grail of cryptocurrency.” (It’s quite a contrast to what McAfee had tweeted a week earlier December 15th: “I personally don’t find anything I would like to talk about about Electroneum. Not that it’s bad, just not special to me. He again claimed that he didn’t have one.
Electoneum jumped 40 percent that day. The McAfee employee took a profit, prosecutors say.
Court documents allege a scum, flush, repetition of that basic schedule that played out through January 28 of the following year. McAfee would instruct his employee to buy “hundreds of thousands or even millions of tokens” in that week’s recommended altcoin less than 10 days before it was shown. McAfee would glorify the virtues of BURST, DGB, RDD, HMQ, TRX, FCT, DOGE, XLM, SYS and RCN. His associate, prosecutors say, would close the position shortly afterward to take advantage of the usual bump. In total, they reportedly pocketed $ 2 million from the pump-and-dump scheme, including hundreds of thousands from Dogecoin alone.