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The US Securities and Exchange Commission (SEC) has filed a civil complaint in US District Court against cybersecurity software developer and ICO hype man John McAfee, alleging he secretly made over $23 million from seven initial coin offerings.
The suit, which also names ex-Team McAfee CEO (and bodyguard) Jimmy Watson, alleges that McAfee shilled seven initial coin offerings without revealing he had been paid to do so.
All told, those seven ICOs raised $41 million. McAfee received $11.6 million in Bitcoin and Ether, plus $11.5 million from the seven projects, while Watson earned $316,000 for helping tout and "scalp" securities by quickly selling the coins after hyping them up, said the SEC.
McAfee is charged with violating Section 17 of the Securities Act and Section 10 of the Securities Exchange Act.
According to the SEC, McAfee lied to investors, claiming he was being paid by the projects themselves. Moreover, according to the suit:
"McAfee falsely claimed to be an investor and/or a technical advisor when he recommended several ICOs, creating the impression that he had vetted these companies, that they were benefitting from his technical expertise, and that he was willing to invest his own money in the ventures. In reality, McAfee’s tweets were paid promotions disguised as impartial investment advice."
At one point, McAfee was outed by the press. According to the SEC, that presented a problem: He still had a lot of now-worthless coins from the ICOs. So, McAfee allegedly pumped the tokens:
"To cash out, McAfee encouraged investors to purchase the securities sold in certain of the ICOs without disclosing that he was simultaneously trying to sell his own holdings and had paid another third-party promoter to tout the securities."
The complaint does not name the ICOs, which occurred between December 2017 and early 2018, but does give some description:
- ICO-1, from a group based in Romania
- ICO-2, from a UK company operating in Nigeria
- ICO-3, from a Belize company operating in Las Vegas
- ICO-4, from an Atlanta company
- ICO-5, from a San Francisco company
- ICO-6, from a Miami company
- ICO-7, from a Virgin Islands company operating in Moscow
- ICO-8 (which falls outside the other seven charges) from a UK company
The SEC is asking the court to order McAfee and Watson to "disgorge all ill-gotten gains they received as a result of the violations alleged herein and to pray prejudgment interest" as well as civil money penalties. It's also seeking to permanently bar McAfee from participating in digital asset security sales.
(This story is breaking, and we are updating it as information becomes available.)