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John McAfee Indicted Over Cryptocurrency Fraud

Computer security pioneer John McAfee has been indicted in the US on fraud and money-laundering charges related to alleged cryptocurrency schemes.

The grand jury indictment accuses McAfee and his executive adviser and bodyguard Jimmy Gale Watson Jr of promoting two cryptocurrencies to McAfee’s large Twitter following to inflate demand.

As the coins’ prices rose, the pair allegedly sold off their holdings, making $13m (£9.4m) in profits, prosecutors said.

McAfee, 75, is currently being detained in Spain after being arrested in Barcelona’s airport last October on unrelated US tax evasion charges.

Deception

The charges were filed in Manhattan federal court in New York City.

McAfee and Watson, 40, allegedly purchased crypto-coins, then promoting them on Twitter, where McAfee has more than 1 million followers.

McAfee told followers of his “Coin of the Day” and “Coin of the Week” tweets that he had no interest in the assets, while presenting himself as a cyber-security and cryptocurrency expert.

McAfee and Watson also allegedly concealed that they were being compensated for the promotional tweets, authorities said.

McAfee, Watson and the rest of his team earned “more than $11 million in undisclosed compensation that they took steps to affirmatively hide” from investors, according to the indictment.

The tweets, dating from December 2017 to February 2018, promoted assets including Verge, Reddcoin and Dogecoin.

‘Pump and dump’

McAfee and Watson sold their holdings after the promotions caused prices to rise, amounting to an “age-old pump-and-dump scheme”, said FBI Assistant Director William F. Sweeney Jr in a statement.

Federal prosecutor Audrey Strauss said McAfee’s actions amounted to having “exploited a widely used social media platform and enthusiasm among investors in the emerging cryptocurrency market to make millions through lies and deception”.

The pair are charged with commodities and securities fraud conspiracy, wire fraud conspiracy, wire fraud, touting fraud conspiracy and money laundering conspiracy.

The Commodity Futures Trading Commission filed related civil charges concerning the scheme.

Watson was arrested on Thursday in Texas, the Justice Department said.

“Jimmy Watson is a decorated veteran and former Navy Seal,” Watson’s attorney Arnold Spencer said in a statement. “He fought for other people’s rights and liberties, and he is entitled to and looks forward to his day in court to exercise some of those very rights.”

Tax evasion

In the separate tax evasion from October, McAfee is accused of failing to file tax returns from 2014 to 2018, while concealing assets including a yacht and property.

McAfee and Watson also face civil charges from the Securities and Exchange Commission, which last October charged McAfee with concealing more than $23.1m he made from promoting seven cryptocurerrency offerings on Twitter.

McAfee, who left the antivirus company that bears his name in 1994, projects a larger-than-life personality online and has twice run for US president.

He resided in Belize for a number of years, and in March 2019 a Florida federal judge ordered him to pay $25m in damages over the 2012 death of an American man who owned a vacation home next to his in the Central American country.

U.S. District Judge Gregory A. Presnell awarded the damages following a civil wrongful death lawsuit alleging that McAfee had ordered the murder of Gregory Faull after Faull reportedly confronted him over his “vicious” dogs and aggressive, heavily armed security guards.

Matthew Broersma

Matt Broersma is a long standing tech freelance, who has worked for Ziff-Davis, ZDnet and other leading publications

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