On the 5th of October 2020, the Securities and Exchange Commission, SEC, charged businessman and computer programmer John McAfee for fraudulently touting ICOs. McAfee is the developer of the eponymous anti-virus software. The computer programmer advertised seven initial coin offerings to his twitter followers allegedly false and misleading.
The regulator alleges that McAfee recommended the cryptocurrency offerings from November 2017 through February 2018. SEC noted that McAfee pretended to be impartial and independent while promoting the ICOs. Besides, he received payments amounting to $23 million in undisclosed compensation for the promotions and leveraged his fame to make that money.
SEC Charges Surround Violation of Anti-fraud Provisions
The SEC complaint alleged that McAfee denied getting paid by the issuers to promote the initial coin offerings ICOs. McAfee also lied about investing in some initial coin offerings and giving advice to specific digital assets issuers.
As per Kristina Littman, Cyber Unit Chief, potential investors in virtual assets securities deserve to know if promoters get compensated by the securities’ issuers. The SEC, therefore, charges McAfee with violating anti-fraud provisions of the federal security laws.
The SEC complaint also looks for permanent injunctive relief, conduct-based injunctions, as well as the return of the ill-gotten gains and civil penalties. The US security and exchange regulator wants to bar McAfee from serving as a public company officer and director. The computer programmer will also get banned from working on any listed company on the ICOs fraudulent issue on twitter, or any company that reports a similar case to the SEC.
Jimmy Watson, McAfee’s Bodyguard, also Charged
According to the SEC complaint, Jimmy Watson, McAfee’s bodyguard, allegedly assisted the computer programmer by negotiating the ICO issuers’ promotion deals. Watson also aided McAfee in cashing out the virtual assets payments for advertising those materially false ICOs.
In return, Watson allegedly received payment amounting to $ 316 000 for his role. As per the SEC complaint, as McAfee and Watson profited from the fraudulent scheme, investors, on the other hand, were left holding digital assets that are virtually worthless.
Watson is also said to have allegedly involved himself in a different scheme to profit from digital assets security. He did this by secretly piling up a significant amount of McAfee’s accounts and then promoting the security on Twitter while intending to sell it and eventually selling McAfee’s holdings as the price surged.
According to the Cyber Unit Chief, Kristina, Watson played a significant role in helping McAfee tout ICOs deceptively to his twitter followers, without telling the investors that he received compensation. The SEC also charged Jimmy Watson with aiding and abetting the sale of materially false and misleading virtual currencies.