CFTC Ends McAfee’s Crypto Pump-and-Dump Charges, Fined Bodyguard $290K

The civil cases in the US against deceased tech mogul John McAfee came to an end as the Commodity Futures Trading Commission (CFTC) dropped the case against him for cryptocurrency pump-and-dump.

The US regulator announced on Monday that it had reached a settlement with Dallas-based Jimmy Gale Watson for his involvement in the crypto pump-and-dump scheme Pump and Dump Scheme A pump and dump scheme is a form of securities fraud that involves artificially inflating the price of a stock via false and misleading positive statements, in order to sell it for a higher price.More recently this type of scheme has also extended to the cryptocurrency space. Subsequently, a group of individual or investors will buy up a crypto asset for a low price simultaneously, prompting the price to rise. This abrupt and rampant increase in an asset’s nominal value will prompt unknowing tra A pump and dump scheme is a form of securities fraud that involves artificially inflating the price of a stock via false and misleading positive statements, in order to sell it for a higher price.More recently this type of scheme has also extended to the cryptocurrency space. Subsequently, a group of individual or investors will buy up a crypto asset for a low price simultaneously, prompting the price to rise. This abrupt and rampant increase in an asset’s nominal value will prompt unknowing tra Read this Term, ordering him to pay more than $290,000.

Watson is a former Navy Seal and became the personal bodyguard of McAfee in 2017. He later became the executive advisor on McAfee’s cryptocurrency team.

McAfee endorsed dubious cryptocurrency initial coin offerings (ICOs) at the peak of the crypto market demand to millions of his social media followers. He was called out by the community for promoting controversial projects and soon came under the regulatory radar.

According to the CFTC CFTC The 1974 Commodity Exchange Act (CEA) in the United States created the Commodity Futures Trading Commission (CFTC). The Commission protects and regulates market activities against manipulation, fraud, and abuse trade practices and promotes fairness in futures contracts. The CEA also included the Sad-Johnson Agreement, which defined the authority and responsibilities for the monitoring of financial contracts between the Commodity Futures Trading Commission and the Securities and Exchange Commiss The 1974 Commodity Exchange Act (CEA) in the United States created the Commodity Futures Trading Commission (CFTC). The Commission protects and regulates market activities against manipulation, fraud, and abuse trade practices and promotes fairness in futures contracts. The CEA also included the Sad-Johnson Agreement, which defined the authority and responsibilities for the monitoring of financial contracts between the Commodity Futures Trading Commission and the Securities and Exchange Commiss Read this Term, Watson helped McAfee by promoting the shady initial coin offering schemes and received undisclosed rewards in return. The duo accumulated digital assets in the anticipation of a price jump after the endorsement and then sold their holdings, like a classic pump-and-dump scheme.

Actions of the Regulator

The CFTC slapped charges on both McAfee and Watson in March 2021. However, the mysterious death of the cybersecurity expert in June last year only left his former bodyguard to face the charges. In addition, it was the first action of the US regulator against a crypto pump-and-dump scheme.

Watson has been ordered to disgorge over $146,000 of the ill-gotten proceeds, along with a civil monetary penalty of an equal amount. Additionally, he consented to a permanent injunction order that would prohibit him from future violations of US regulations, along with registration and trading bans.

“The CFTC will continue actively to use its enforcement authority in the digital asset space to combat fraud and manipulation,” Gretchen Lowe, CFTC’s Acting Director of Enforcement, said.

Furthermore, Watson entered into a similar settlement and accepted a banning order from the Securities and Exchange Commission (SEC) against civil chargers. He is still facing criminal charges brought by the Justice Department.