The US Securities and Exchange Commission (SEC) said that John McAfee has earned $23 million by promoting ICOs. The watchdog said that he was under contract to promote ICOs through his social media channels.
Seven ICOs paid him millions
The SEC said that McAfee, the founder of his namesake computer security company, earned millions by promoting seven ICOs through his social media accounts. He did not disclose his financial ties with these seven projects. The total amount of secret compensation was $23.1 million. He used his Twitter fame to promote the tokens but never told the regulators about his dealings. He was able to pocket nearly 50% of the funds that these ICOs managed to raise in return for his promotions.
The agency said,
“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”
Failure to disclose gains
The SEC targeted McAfee specifically for failing to disclose that his endorsements were paid for. According to SEC rules, celebrities cannot use their social media influence to promote securities without disclosing the compensation they received. The regulator said that he leveraged his fame to make over $23 million between November 2017 to February 2018. It noted that the seven ICOs involved in the investigation were offering the sale of digital asset securities. It noted that recommendations made by McAfee were materially false and misleading.
He was paid $11.6 million in Ether and Bitcoin alongside an additional $11.5 million in promoted tokens. The tokens raised almost $41 million in total. McAfee claimed that he was only an investor who was investing his own money in these ICO projects. In some cases, he also presented ICO information as unbiased research from his end. He wanted to give the impression that he has thoroughly vetted the products and companies and they were benefiting from his experience and expertise.
His tweets were paid for, but disguised as unbiased investment advice. He was also charged with defrauding investors with his useless tokens when he was not able to generate anymore interest in them. His exit strategy was to encourage investors to purchase securities that were sold in some of the ICOs without disclosing that he was trying to sell his own holdings at the same time.