| | | Effective PR

And we're back - the USA's cross with John McAfee again.

Nigel Morris-Cotterill

Dogs, palm trees, a rather individual way of life in the tropics - John McAfee - the chap who, effectively, created the software anti-virus industry - has long been a thorn in the side of the US authorities but exactly why he gets so much attention when so many other slide by is a mystery. Yes, there was something about a gun but now he's in trouble for making comments on Twitter. They say he "fraudulently touted" Initial Coin Offerings. Er.. isn't that tautology?

This is an edited version of the SEC's media release yesterday.

The Securities and Exchange Commission today issued proceedings against businessman and computer programmer John McAfee for promoting investments in initial coin offerings (ICOs) to his Twitter followers without disclosing that he was paid to do so. McAfee’s bodyguard, Jimmy Watson, Jr., was also charged for his role in the alleged scheme.

According to the SEC’s complaint, McAfee promoted multiple ICOs on Twitter, allegedly pretending to be impartial and independent even though he was paid more than USD23 million in digital assets for the promotions.

When certain investors asked whether he was paid to promote the ICOs, McAfee allegedly denied receiving any compensation from the issuers. [so, there's the fraud]

The complaint alleges that McAfee made other false and misleading statements, such as claiming that he had personally invested in some of the ICOs and that he was advising certain issuers. [Another fraud]

The complaint alleges that Watson assisted McAfee by negotiating the promotion deals with the ICO issuers, helping McAfee cash out the digital asset payments for the promotions, and, for one of the ICOs McAfee was promoting, having his then-spouse tweet interest in the ICO. [This is interesting because it appears to be conspiracy rather than direct action. The SEC brings civil proceedings (which is why we take the word "charge" out of their press releases. Does the SEC have power to bring civil proceeding for conspiracy? ]

Watson was allegedly paid at least USD316,000 for his role. According to the complaint, while McAfee and Watson profited, investors were left holding digital assets that are now essentially worthless.

McAfee and Watson also allegedly engaged in a separate scheme to profit from a digital asset security by secretly accumulating a large position in McAfee’s accounts, touting that security on Twitter while intending to sell it, and then selling McAfee’s holdings as the price rose. [pump and dump]

“Potential investors in digital asset securities are entitled to know if promoters were compensated by the issuers of those securities,” said Kristina Littman, Cyber Unit Chief. “McAfee, assisted by Watson, allegedly leveraged his fame to deceptively tout numerous digital asset securities to his followers without informing investors of his role as a paid promoter.”

The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, charges McAfee and Watson with breaching anti-fraud provisions of the federal securities laws, McAfee with breaching the anti-touting provisions and Watson with aiding and abetting McAfee’s breaches. [This partially answers the question about conspiracy. It's strange, though, that civil proceedings are couched in terms - in this case "aiding and abetting") that we would usually expect to see in criminal prosecutions.

The complaint seeks permanent injunctive relief, conduct-based injunctions, return of allegedly ill-gotten gains and civil penalties.

The SEC also seeks to bar McAfee from serving as a public company officer and director.

The Tax Division of the Department of Justice announced today that it brought criminal charges against McAfee.

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