The United States Securities and Exchange Commission (SEC) has filed fraud charges against tech entrepreneur John McAfee.
The authorities allege that the influencer received over $23.1 million to promote initial coin offerings (ICOs) on his verified Twitter account which boasts hundreds of thousands of followers. He did not disclose the payments he received for the promotion to his audience.
McAfee vs. U.S. SEC
According to the allegations, McAfee leveraged his fame to promote at least seven different ICO projects on his handle between November 2017 and February 2018. Given that the SEC views almost all ICO tokens as securities, McAfee’s promotion of these projects without disclosing that he was paid to do so is unlawful “touting” and violates the federal securities laws.
The SEC further alleged that projects that McAfee promoted during that period raised at least $41 million of which McAfee was paid bitcoin (BTC) and ether (ETH) worth more than $11.6 million, plus an additional $11.5 million worth of promoted tokens.
Among the projects he promoted included U.S.-based business entities (Atalanta, Nevada, California) and other offshore companies with their businesses based in Romania, the United Kingdom, and Nigeria.
At one point, the SEC alleges that McAfee practiced scalping, the process of touting tokens after accumulating large amounts of the asset, without disclosing his intent to sell it. At this point, the commission alleged that he was “holding a large number of virtually worthless securities from the ICOs he had previously touted,” and was looking for a way to cash out without substantial losses.
His accomplice, Jimmy Gale Watson, who works as McAfee’s bodyguard, was also listed as a defendant for his part in the alleged fraudulent practices. Watson had received at least $316,000 for his role which includes negotiating the terms for the undisclosed payments and triggering contracts on behalf of McAfee.
In one instance, the SEC cites an email from Watson in which he wrote: “Mr. McAfee promotes ICOs for 25% of the ICO income plus a percentage of the coins. Please let us know if you are interested.”
The SEC is seeking disgorgement of the ill-gotten gains from both defendants and the redemption of other civil money penalties.
