McAfee Indicted for Fraud, Money Laundering Conspiracy Crimes

Former software firm founder could spend the rest of his life behind bars if convicted.


John McAfee, founder of cybersecurity software company McAfee, has been indicted on multiple charges stemming from two purported schemes relating to the allegedly fraudulent promotion of cryptocurrencies. Jimmy Watson, who served as an executive adviser on McAfee’s “cryptocurrency team,” was also charged in the indictment.

According to the allegations in the complaint, which was unsealed in Manhattan federal court, the first of the two schemes involved a fraudulent practice called “scalping,” also known as a “pump-and-dump” scheme. As part of the alleged scheme, McAfee, Watson, and other associates allegedly bought large quantities of publicly traded cryptocurrency altcoins at low market prices, knowing that McAfee planned to publicly endorse them on his Twitter account, which had approximately 784,000 followers.

After the purchases were made, McAfee allegedly published false and misleading endorsement tweets recommending the altcoins to members of the investing public in order to artificially inflate their market prices. And he did so without disclosing that he owned large quantities of the promoted altcoins, even though he gave assurances that he would disclose such information. McAfee, Watson, and other McAfee team members then sold the altcoins during the temporary, but significant, short-term market price increases that McAfee’s tweets generated.

According to the complaint, McAfee, Watson, and other McAfee team members collectively earned more than $2 million in profits from scalping altcoins, while the long-term value of the altcoins declined substantially as of a year after the promotional tweets. 

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As part of the second alleged scheme, McAfee, Watson, and other McAfee associates are accused of using McAfee’s official Twitter account to publicly tout initial coin offerings (ICOs) while hiding the fact that the ICO issuers were compensating McAfee and his team for the promotional tweets from funds provided by investors. From late December 2017 through early February 2018, McAfee, Watson, and other McAfee team members allegedly collectively earned more than $11 million in undisclosed compensation, the complaint said.

“As alleged, McAfee and Watson used social media to perpetrate an age-old pump-and-dump scheme,” FBI Assistant Director William Sweeney Jr. said in a statement. “Additionally, they allegedly used the same social media platform to promote the sale of digital tokens on behalf of ICO issuers without disclosing to investors the compensation they were receiving to tout these securities on behalf of the ICO.”

McAfee, 75, and Watson, 40, have been charged with one count of conspiracy to commit commodities and securities fraud, which carries a maximum potential sentence of five years in prison; one count of conspiracy to commit securities and touting fraud, which carries a maximum potential sentence of five years in prison; two counts of conspiracy to commit wire fraud and two counts of substantive wire fraud, each of which carries a maximum potential sentence of 20 years in prison; and one count of conspiracy to commit money laundering, which carries a maximum potential sentence of 10 years in prison.

Watson was arrested in Texas in early March, and McAfee is currently being detained in Spain on separate criminal charges filed by the Department of Justice’s Tax Division.

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