On the evening of December 20, 2017, the controversial cybersecurity pioneer John McAfee tweeted that he would embark on something of an educational blitz. “Beginning tomorrow, I will each day talk about a unique altcoin,” McAfee wrote. “Most of the 2,000 coins are trash or scams. I’ve read every white paper. The few I’m connected to I will tell you. The rest I have no position in.” It’s that last bit that caught the attention of the Department of Justice.
On Friday the US Attorney’s Office of the Southern District of New York indicted McAfee and executive assistant Jimmy Watson on multiple charges that encompass two alleged cryptocurrency schemes. (McAfee was previously indicted in October for separate tax evasion charges.) According to court documents, McAfee and his associates raked in a combined $13 million between the two efforts, both of which relied on using McAfee’s popular Twitter account to push niche cryptocurrencies or promote initial coin offerings without disclosing that he stood to profit, either through investment gains or promotional fees.
“As alleged, McAfee and Watson exploited a widely used social media platform and enthusiasm among investors in the emerging cryptocurrency market to make millions through lies and deception,” said Manhattan US attorney Audrey Strauss in a press release. “The defendants allegedly used McAfee’s Twitter account to publish messages to hundreds of thousands of his Twitter followers touting various cryptocurrencies through false and misleading statements to conceal their true, self-interested motives.”
Pump You Up
The altcoin talks that McAfee promoted were one alleged leg of that deception. In mid-December 2017, he allegedly directed an associate to buy around $5,000 worth of tokens in XVG, also known as Verge. That same day on Twitter, McAfee described XVG—along with more established tokens like Monero and Zcash—as a coin that “cannot lose.” Two days later, when a Twitter user suggested McAfee had “pumped” XVG, artificially inflating its value in order to sell high, McAfee responded with indignation. “I own no XVG,” he wrote. “I live [sic] how you shallow folks cannot distinguish between someone who shamelessly speaks his mind- because it’s true – and someone with an ulterior motive. You know absolutely nothing about me if you believe I have the time to waste spewing garbage.”
XVR spiked 500 percent in the four days after McAfee’s initial tweet. McAfee, prosecutors say, sold near the top, turning a tidy $30,000 profit.
That success appears to have inspired what McAfee would call his “Coin of the Week” series. The same day he announced his journey into “unique altcoins” on Twitter, McAfee allegedly instructed an associate to put $100,000 of bitcoin into Electroneum tokens. On December 21, 2017, he tweeted a glowing, bulleted report on ETN, including an assertion that he had “more than one DM calling Electroneum the holy grail of cryptocurrency.” (It’s quite a contrast to what McAfee had tweeted just one week earlier, on December 15: “I personally find nothing about Electroneum that I would like to talk about. Not that it’s bad, just not special to me.”) He again claimed that he owned none.
Electoneum jumped 40 percent that day. McAfee’s associate cashed out at a profit, prosecutors say.
Court documents allege a lather, rinse, repeat of that basic scheme played out through January 28 of the following year. McAfee would instruct his associate to purchase “hundreds of thousands or even millions of tokens” in that week’s featured altcoin less than 10 days before featuring it. McAfee would extol the virtues of BURST, DGB, RDD, HMQ, TRX, FCT, DOGE, XLM, SYS, and RCN. His associate, prosectors say, would close the position soon after to profit from the usual bump. In all, they allegedly pocketed $2 million from the pump-and-dump scheme, including hundreds of thousands from Dogecoin alone.