X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
stack of cryptocurrencies: bitcoin, ethereum, litecoin, monero, dash, and ripple coin together, 3D rendering. New virtual money. Photo: by Wit Olszewski/Shutterstock Photo: by Wit Olszewski/Shutterstock

On March 5, 2021, the U.S. Attorney’s Office for the Southern District of New York charged John McAfee and his former employee, Jimmy Gale Watson, with conspiracy, fraud, and money laundering charges in connection with his cryptocurrency activities—specifically McAfee’s Twitter statements touting various cryptocurrencies and his false and misleading statements concerning personal investments or other involvement with those same cryptocurrencies. The U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) have filed civil charges against McAfee and his former colleague in separate parallel actions, each based on a different aspect of McAfee’s alleged scheme. This case and the expected upcoming congressional task force on cryptocurrencies are likely to provide the market with more clarity on how coins and projects will be treated in investigations, including whether they can be treated as securities or commodities and the relative roles of the SEC and CFTC.

In the McAfee case, the first alleged part of the scheme is a pump-and-dump. A pump-and-dump scheme generally involves a party or entity acquiring a position in a financial instrument and then artificially inflating the value of that instrument before selling at an inflated price. In this case, McAfee and his team allegedly bought large quantities of various less popular than Bitcoin but publicly traded cryptocurrencies, such as Dogecoin, Reddcoin, and Verge. McAfee, a public figure of sorts because of his anti-virus software and social media following, then publicly endorsed and recommended a particular cryptocurrency on Twitter. When the value of that cryptocurrency increased, McAfee and his team sold their investments, earning a cumulative profit of approximately $2 million. According to the indictment, McAfee liquidated many of his cryptocurrency holdings through New York Stock-Exchange-based companies, implicating various securities laws.

Want to continue reading?
Become a Free ALM Digital Reader.

Benefits of a Digital Membership:

  • Free access to 1 article* every 30 days
  • Access to the entire ALM network of websites
  • Unlimited access to the ALM suite of newsletters
  • Build custom alerts on any search topic of your choosing
  • Search by a wide range of topics

*May exclude premium content
Already have an account?

Law Firms Mentioned

 
Reprints & Licensing
Mentioned in a Law.com story?

License our industry-leading legal content to extend your thought leadership and build your brand.

 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.