On March 5, 2021, the U.S. District Court docket for the Southern District of New York unsealed an indictment charging John McAfee, the founding father of McAfee antivirus software program firm, together with the manager advisor of his cryptocurrency group, Jimmy Watson Jr. The pair face prices on seven counts together with wire fraud, cash laundering, and conspiracy to commit commodities and securities fraud by touting and scalping. Watson had been arrested in Texas the evening earlier than the indictment was introduced, and McAfee stays detained in Spain awaiting extradition to the USA on tax fraud prices filed in October 2020.
The indictment claims that McAfee and his group had been concerned in various fraudulent schemes together with touting varied cryptocurrencies over Twitter via false statements after which withdrawing income after these statements prompted the belongings to extend in worth. In lots of of those conditions, McAfee had been compensated to endorse the cryptocurrencies, however his public statements didn’t point out this reality.
The indictment alleges that McAfee and his group had been conscious of their obligations to reveal their compensation. After bloggers made point out of his obligations, McAfee and his group used pseudonymous accounts to proceed the exercise. From December 2017 via October 2018, the grievance alleges McAfee and Watson used social media platforms to publish deceptive statements relating to preliminary coin choices, cryptocurrencies to buy, and different schemes to induce traders into buying these belongings. The alleged scheme earned the group greater than $13 million in income.
Small digital belongings—like penny shares—are notably vulnerable to cost strikes from fraudulent exercise. They’re thinly traded, their holdings are largely nameless, and there’s sufficient market pleasure about cryptocurrency that properly positioned assertion, particularly by celebrities, could cause adequate market exercise to maneuver costs shortly. Combining that with a social media platform that reaches 1000’s of potential market individuals shortly and effectively and you’ve got the makings of what the Division of Justice has known as “an age-old pump-and-dump scheme.”
The U.S. Authorities, together with the Securities and Change Fee and the Commodities Futures Buying and selling Fee, have warned traders about these schemes via paperwork similar to The DAO Report and the SEC FinHub web site, notably with respect to celebrities. We’ll proceed to watch Commodity Futures Trading Commission v. McAfee et al. and U.S.A v. McAfee et al. as they develop.
© 2020 BARNES & THORNBURG LLPNationwide Legislation Evaluation, Quantity XI, Quantity 72