Tech leader and founder of a popular anti-virus software John McAfee was indicted in a fraud and money laundering conspiracy that raked in more than $13 million, federal officials announced.
The leader of McAfee's cyptocurrency team, Jimmy Gayle Watson Jr., 75, was also charged in the alleged scheme. Their arrests were announced on March 5.
Watson was arrested in Texas on March 4 and McAfee is being held in Spain on U.S. charges from another case.
Federal prosecutors in New York say the two men and other members of McAfee's group conducted two schemes between December 2017 and October 2018.
In the first scheme, the group bought large amounts of cryptocurrency at inexpensive market prices with the knowledge that McAfee would then publicly endorse them on his popular Twitter account. Cryptocurrency is qualified as commodities or securities.
McAfee, 40, then published false or misleading endorsements and recommended the currency to inflate their market prices, without saying he owned large amounts, according to federal prosecutors.
The group then sold their cryptocurrency at the short-term, inflated prices, the feds allege.
Prosecutors say the group made more than $2 million in profit in that scheme.
The second scheme involved team members using McAfee's Twitter account to publicly endorse fundraising events called "initial coin offerings," according to prosecutors.
These offerings took startup business and sold digital coins as securities to the public, without disclosing the companies compensated McAfee and his team for the tweets.
McAfee's team made more than $11 million in these offerings, according to the indictments.
Watson and McAfee also caused other team members to engage in banking transactions to launder the proceeds of the initial coin offering scheme, prosecutors said.
The federal Securities and Exchange Commission also filed civil charges against McAfee and Watson over the same allegations.
McAfee and Watson were each charged with seven counts. The charges and the punishments are:
- 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.
- One count of conspiracy to commit money laundering, which carries a maximum potential sentence of ten years in prison.
The duo could also face financial penalties as a result of the alleged scheme.
"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," Manhattan U.S. Attorney Audrey Strauss said in announcing the indictments.
"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. McAfee, Watson, and other members of McAfee’s cryptocurrency team allegedly raked in more than $13 million from investors they victimized with their fraudulent schemes. Investors should be wary of social media endorsements of investment opportunities."