Famed antivirus software pioneer and Twitter personality John McAfee urged Twitter followers to invest in numerous initial coin offerings (ICOs) while failing to reveal that he had been paid more than $23 million in digital assets in order to promote them, according to the Securities and Exchange Commission.
The news comes on the same day that the Department of Justice unsealed a June indictment against McAfee for tax evasion.
Between November 2017 and July of the following year, McAfee recommended at least seven ICOs to his hundreds of thousands of Twitter followers, according to the SEC complaint. As a result, the ICOs raised at least $41 million, with McAfee making about $23.2 million in compensation. However, when asked by investors whether he was being paid to promote the offerings, McAfee lied and denied it, according to the SEC. Jimmy Watson Jr., McAfee's bodyguard, was also charged in helping McAfee pull off the alleged scheme.
“Potential investors in digital asset securities are entitled to know if promoters were compensated by the issuers of those securities,” Kristina Littman, the SEC’s Cyber Unit chief, said. “McAfee, assisted by Watson, allegedly leveraged his game to deceptively tout numerous digital asset securities to his followers without informing investors of his role as a paid promoter.”
McAfee first gained success as the founder of McAfee Associates, where the company developed antivirus protection software. After retiring in the mid-90s, he has pursued other business interests, becoming a well-known Twitter personality and two-time unsuccessful presidential candidate in 2016 and 2020.
According to the SEC, McAfee also falsely claimed to be an investor or a technical advisor when recommending the offerings, making it seem that he had vetted the companies and would be willing to invest his own earnings. But a blogger revealed that McAfee had been paid to promote the offerings, making it more difficult to convince investors with tweets. In addition, McAfee was still holding a large number of those securities he had promoted, according to the commission.
“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 read.
Watson helped negotiate deals with ICO issuers who wanted McAfee to promote their offerings, while helping McAfee to monetize the proceeds of the promotions. Additionally, Watson’s then-wife tweeted fake interest in one of the ICOs McAfee was promoting at Watson’s direction, the complaint read. The SEC stated that McAfee paid Watson at least $316,000 for his actions.
For the violation of antifraud provisions, the SEC sought permanent injunctive relief, conduct-based injunctions, as well as the return of allegedly ill-gotten gains and civil penalties. The commission also wants McAfee barred from ever serving as an officer and director for public companies. If convicted for tax evasion, McAfee could face a maximum sentence of five years in prison on each count of tax evasion, along with one year in prison for each count of willful failure to file a tax return, according to the DOJ. He is currently under arrest in Spain, pending extradition.
