US Charges Infosec Veteran John McAfee over Cryptocurrency Pump-and-Dump Scheme
Catalin Cimpanu March 5, 2021

US Charges Infosec Veteran John McAfee over Cryptocurrency Pump-and-Dump Scheme

US Charges Infosec Veteran John McAfee over Cryptocurrency Pump-and-Dump Scheme

The US Department of Justice has indicted today John McAfee, the founder of cybersecurity firm McAfee, on fraud and money laundering charges stemming from schemes that netted the infosec veteran more than $13 million.

Together with McAfee, DOJ officials also charged Jimmy Gale Watson Jr., who served as McAfee’s bodyguard and a member of his “cryptocurrency team.”

Pumping and dumping

According to court documents, US officials said that McAfee and his partner were involved in two separate schemes that defrauded cryptocurrency investors.

The first took place between December 2017 and October 2018 and was a classic “scalping,” or “pump-and-dump” scheme.

US officials claim that McAfee, Watson, and other members of the McAfee team bought large quantities of lesser-known cryptocurrencies, which McAfee heavily promoted on his high-profile Twitter account, only to sell off the coins after promotional efforts inflated trading prices.

The scheme netted McAfee and co-conspirators more than $2 million, the DOJ said, while also incurring huge losses to investors after the cryptocurrencies lost their value within a year.

Undisclosed ICO promotions

In addition, US officials also charged McAfee with fraud for not disclosing paid endorsements on his Twitter account and making false statements to his followers.

According to court documents, between December 2017 and February 2018, McAfee promoted on multiple occasions various cryptocurrencies and initial coin offerings (ICOs) as “Coin of the Day” and “Coin of the Week” endorsements on his Twitter account.

But officials said that McAfee did not disclose that he was being compensated for the tweets, breaking US Securities and Exchange Commission rules, and regularly denied the fact when confronted by his followers.

In total, the DOJ claims that McAfee and associates made more than $11 million from paid endorsements, a number inferior to the $23 million sum cited in a civil case filed by the SEC in October 2020.

“When engaging in illegal activity, simply finding new ways to carry out old tricks won’t produce different results. Investment fraud and money laundering schemes carry a strict penalty under federal law,” said FBI Assistant Director William F. Sweeney Jr.

McAfee is currently detained in Spain in a separate DOJ case filed in October 2020 on tax evasion charges. He faces up to 30 years in prison for his latest charges alone.

Image credits:  Gage Skidmore, CC BY-SA 2.0

Catalin Cimpanu is a cybersecurity reporter for The Record. He previously worked at ZDNet and Bleeping Computer, where he became a well-known name in the industry for his constant scoops on new vulnerabilities, cyberattacks, and law enforcement actions against hackers.