You Are at Risk

Admittedly, that may be a little tongue in cheek blended with click-bait but, if you ever had a McAfee antivirus installed on your computer, you’ll see why this title makes sense. Read the article to know more about John McAfee Fraud and Money Laundering.

On March 5, 2021, John McAfee, the maligned founder of his eponymous cybersecurity tech company, was indicted on charges of securities fraud and money laundering. Over the years, McAfee, the celebrity and household name synonymous with anti-virus software, has had its share of bad publicity. Most of his questionable behaviors have largely been written off as “eccentric” and “not unexpected” given his vast wealth secured through the sale of his company and a purported lifestyle that goes along with which included a private jet, island hopping, soliciting a prostitute and then marrying her.

However, the “eccentric” defense is unlikely to hold up in court against the US Department of Justice (DOJ). Why? Because his attempts (and successes) manipulating the markets played out on social media leaving a traceable record that has presumably left the DOJ salivating: even an amateur should be able to successfully convict McAfee given the public display of market manipulation on his Twitter account.

As a regtech vendor, the question is, why wasn’t this pump and dump scheme detected before millions of ill-gotten gains had been acquired? Why did it take so long to shut down; was McAfee repeatedly perpetrating this scheme for over a year? And should anyone who was following McAfee and engaging in the dialogue captured on the platform be investigated? The story echoes what has recently played out with the GameStop trading war that keeps taking new twists and turns and it’s likely going to be a while before regtech and social media become tied at the hip.

The rise and fall of McAfee

As a society, we’re fascinated by stories of people who have beaten the odds, but we are titillated and wholly enraptured by stories of people who had it all – and lost it. McAfee falls into the latter camp. In 1992, he founded McAfee Security. In 2010, he sold it to Intel for $7.7 Billion.

Why he allegedly perpetrated multiple pump-and-dump schemes in crypto may be explained by his “riches to rags” decline. Through a series of ill-timed and bad investments in Lehman Brothers’ bonds and other holdings at the height of the Financial Crisis, McAfee lost nearly all the wealth that he had accumulated. He sold real estate, his jet, his airplane collection and other investments for pennies on the dollar to remain solvent. Last year, his net worth was estimated under $4 million.

Not his first rodeo

McAfee, it seems, has worked hard to cultivate his “bad boy and bad actor” reputation. He’s had a series of encounters with the law – around the globe – and got the photo plus striped jumpsuit to prove it. As a named “person of interest” involving the death of his neighbor in Belize in 2012, McAfee went on the run. He beat the murder wrap but was in the hands of the police again a few years later. This time, it was in Spain where he was arrested for tax evasion having made millions off cryptocurrencies and reportedly selling his life story for a biopic.

Ironically coinciding with McAfee’s October 2020 arrest was the second IPO of McAfee Security which closed the first day of trading valued at just under $8 Billion. The anti-virus software company has gone through multiple incarnations since its inception in 1992. After Intel acquired it in 2010, it sold off a large equity stake (66%) to TPG in 2014; at that time, McAfee Security became a private company again, only to return to the markets to be publicly traded nearly six years later.

According to the Securities and Exchange Commission (ICO), McAfee’s arrest in October 2020 went beyond tax evasion. The SEC charged McAfee citing that he was “pretending to be impartial and independent even though he was paid more than $23 million in digital assets for the promotions.” His millions of Twitter followers basked in his irreverence and keenly followed whatever financial advice he shared. If a regtech vendor had been tracking his tweets, it’s possible that his paid – but unreported – endorsements of select crypto funds could have been detected sooner. Those insights may have been useful to thwart similar moves seen months later in the Gamestop saga.

McAfee was promoting ICOs (Initial Coin Offerings – which are similar to IPOs to raise funds publicly within the cryptocurrency markets). Doing so would excite his social media followers, many of whom would then invest in the ICO. “Pump and dump” is a classic scheme that McAfee appears to have used over and over again, one ICO at a time. The reports suggest that he was being paid on the front-end to promote select ICOs and then he was also benefiting on the back-end by buying low and selling high. The result? An estimated $20-25 million in profit.

Now faced with multiple indictments and awaiting extradition from Spain, McAfee will be awaiting trial on everything from tax evasion to market manipulation. The SEC and DOJ likely feel confident that their respective charges will stick given the “paper trail” McAfee left behind on social media. Okay, one bad actor is likely going to be punished for his crimes, but what about everyone else? McAfee’s market manipulation saga has played out for at least a year and the Gamestop saga of gamers gaming the system has been making international headlines for months.

These two examples beg a bigger question. Why has the SEC not yet mandated – or at least secretly provisioned – the surveillance of social media to identify, document, report and halt the bad behaviors? These market manipulations are seemingly being played out publicly right under the noses of the agencies tasked with regulating such activities leaving us to ask, when will social media be formally monitored?