The Securities and Exchange Commission (SEC) has charged John McAfee, the founder of computer security company McAfee, for promoting seven initial coin offerings (ICOs) without disclosing that he was paid to do this.
The US top agency 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 $23.1 million in secret compensation for touting unlicensed tokens, he never disclosed to the regulators that he pocketed nearly half of the funds these ICOs had raised in exchange for his promotional deals.
“When directly asked if he was being paid for these promotions, McAfee lied to investors by falsely denying he was being paid by the issuers,” the agency said.
The SEC specifically targeted McAfee for failing to disclose that his endorsement of the projects was paid for, which is a direct circumvention of its regulations. Celebrities are not allowed to use their social media influence to tout securities without disclosing their compensation.
“From at least November 2017 through February 2018, McAfee leveraged his fame to make more than $23.1 million U.S. Dollars (‘USD’) in undisclosed compensation by recommending at least seven ‘initial coin offerings’ or ICOs to his Twitter followers. The ICOs at issue involved the offer and sale of digital asset securities and McAfee’s recommendations were materially false and misleading for several reasons,” the SEC said.
FBS CopyTrade Launches a New Card Scanning Feature!Go to article >>
McAfee was paid in Bitcoin and Ethereum worth more than $11.6 million, 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.
McAfee was further charged with duping investors to buy his worthless tokens when he could no longer generate interest in ICOs with tweets.
“To cash out, McAfee encouraged investors to purchase the securities sold in certain of the ICOs without disclosing that he was simultaneously trying to sell his own holdings and had paid another third-party promoter to tout the securities,” the SEC further explains.
Finally, the watchdog said McAfee not only lied about his own independence but also engaged in a practice known as ‘scalping’ otherwise known as selling tokens he had accumulated as soon as its price rose, usually after touting it on Twitter without disclosing his intent to sell it.
At the time, ICO operators, and sometimes ‘scammers,’ had been trying to capitalize on the intersection of celebs and cryptocurrency enthusiasts to grab money from investors in the hot market. The trend of celebrity endorsements even forced the SEC to release an official statement ordering the involved celebrities to disclose the nature, scope, and amount of compensation received in exchange for the promotion.