Eccentric cryptocurrency evangelist John McAfee, who commanded headlines in Malta as lead speaker at the Malta Blockchain Conference in 2018, was charged on Friday by US Federal Prosecutors with fraudulent market manipulation and money laundering.
McAfee, previously best known for his anti-virus software, is currently awaiting extradition from Spain to the US for tax evasion also involving cryptocurrencies.
On 29 August 2018, McAfee tweeted to his over 1 million Twitter followers that he would be headlining the Malta Blockchain Conference, the first of many government-sponsored crypto conferences organised to pitch Malta as the ‘Blockchain Island’.
According to the criminal charges and linked civil claim filed in the US District Court (SDNY), McAfee did a lot more than just promote Malta’s ill-fated crypto venture on Twitter. The recently unsealed charges claim that McAfee and his bodyguard/advisor, Jimmy Gale Watson Jr, engaged in a fraudulent ‘pump and dump’ scheme in late 2017 and early 2018 involving several cryptocurrencies including through his large social media presence.
A ‘pump and dump’ scheme is a market manipulation tactic involving secretly buying a little known security, heavily promoting it (pumping) and then, as the price shoots up, dumping the securities at a profit. Inevitably, once the manipulative promotion stops or the market otherwise catches up, smaller investors are left with worthless security or in this case cryptocurrency.
The charges specifically mention Verge, Reddcoin and Dogecoin cryptocurrency as allegedly being the subject of past pump and dump schemes by McAfee. The pump and dump scheme would have netted McAfee and Watson $2 million in profits, according to the Commodity Futures Trading Commission who filed the civil claim.
McAfee is also charged with illicitly profiting from promoting other cryptocurrencies without disclosing that he was being paid by the issuer to promote their cryptocurrency. This latter scheme would have netted McAfee over $11 million in payments from issuers.
In 2018 McAfee had himself revealed that he charged $105,000 per tweet promoting “initial coin offerings” to his million followers. The Federal Prosecutors claim that several of these cryptocurrencies promoted in this manner in fact qualified as securities and accordingly were subject to US market manipulation laws that prohibit the touting of securities.
A detailed report in 2018 by Motherboard had tracked the influence of tweets by McAfee on the price of particularly smaller cryptocurrencies noting that just one tweet from his Twitter account could send the price up by up to 350%.