US regulators have dropped the case against deceased John McAfee, the founder of computer security company McAfee, who was accused of promoting crypto projects without disclosing that he was paid to do this.
The Commodity Futures Trading Commission also settled similar charges with Jimmy Gale Watson, who had served as McAfee’s bodyguard from 2017 before becoming the executive adviser of his cryptocurrency team.
The CFTC order requires Watson to disgorge over $146,000 he received in ill-gotten gains from the scheme and also to pay an equal amount in a civil monetary penalty. The order also imposes registration and trading bans.
McAfee was found dead, aged 75, last year in his prison cell a few hours after Spain’s high court authorised his extradition to the United States on tax evasion charges. The antivirus software entrepreneur was charged along with his former employee, Jimmy Gale Watson on what prosecutors described as McAfee’s cryptocurrency team.
US authorities accused McAfee and his executive adviser of promoting seven initial coin offerings (ICOs) without disclosing that they were paid to do this. Additionally, the CFTC said McAfee was contracted by ICO projects to promote the sale on his social media channels, particularly leveraging his fame on Twitter.
While he received more than $13 million in secret compensation for touting unlicensed tokens, the Silicon Valley legend never disclosed to the regulators that he pocketed nearly half of the funds these ICOs had raised in exchange for his promotional deals.
McAfee was paid more than $11.6 million in Bitcoin and Ethereum, plus an additional $11.5 million worth of promoted tokens for his promotions of seven ICOs that reportedly raised $41 million in the process.
Some of that alleged dishonest promotion was related to McAfee’s claims that he was merely an investor who was willing to invest his own money in the ventures. In other cases, he presented ICO information as unbiased research to create the impression that he vetted these companies, and that they were benefitting from his technical expertise. In fact, McAfee’s tweets were paid promotions disguised as impartial investment advice without disclosing that he received either cash or cryptocurrencies for his services.
In addition, McAfee was charged with duping investors to buy the worthless tokens when he could no longer generate interest in ICOs with tweets.
Finally, the watchdog said McAfee not only lied about his own independence but also engaged in a practice known as ‘scalping’ which involves selling tokens he had accumulated as soon as its price rose, usually after touting it on Twitter without disclosing his intent to sell it.
In a separate case, McAfee was indicted for tax evasion in the US after allegedly failing to declare earnings running into millions of dollars. He was arrested by Spanish police in December 2020 while attempting to board a flight from Barcelona to Istanbul.