SEC confirms hurdles in effecting service on computer programmer John McAfee
The United States Securities and Exchange Commission (SEC) has confirmed that it is engaged in a rather protracted process of effecting service on computer programmer John McAfee, accused of fraudulently touting initial coin offerings (ICOs). This becomes clear from the latest document filings with the New York Southern District Court.
In a Letter dated December 23, 2020, the SEC says that McAfee is currently being detained in a Spanish prison, in connection with a related criminal case in the Western District of Tennessee.
The SEC began the process of serving McAfee through the Convention on Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (“Hague Convention”), as provided in Rule 4(f)(1), by mailing the required documentation to the relevant Spanish authorities on October 22, 2020. At present, however, the SEC cannot estimate how long this process will take.
The Court has agreed with the SEC that, absent successful Hague Convention service, the regulator will provide a further status update on service efforts to the Court by February 15, 2021, and every 60 days hereafter.
Let’s recall that, in October 2020, the SEC charged John McAfee for promoting investments in initial coin offerings (ICOs) to his Twitter followers without disclosing that he was paid to do so. McAfee’s bodyguard, Jimmy Watson, Jr., was also charged for his role in the alleged scheme.
According to the SEC’s complaint, McAfee promoted multiple ICOs on Twitter, allegedly pretending to be impartial and independent even though he was paid more than $23 million in digital assets for the promotions. The complaint alleges that McAfee made false and misleading statements, such as claiming that he had personally invested in some of the ICOs and that he was advising certain issuers.
According to the complaint, while McAfee and Watson profited, investors were left holding digital assets that are now essentially worthless.
McAfee and Watson also allegedly engaged in a separate scheme to profit from a digital asset security by secretly accumulating a large position in McAfee’s accounts, touting that security on Twitter while intending to sell it, and then selling McAfee’s holdings as the price rose.
The SEC’s complaint charges McAfee and Watson with violating antifraud provisions of the federal securities laws, McAfee with violating the anti-touting provisions, and Watson with aiding and abetting McAfee’s violations.
The complaint seeks permanent injunctive relief, conduct-based injunctions, return of allegedly ill-gotten gains, and civil penalties. The SEC also seeks to bar McAfee from serving as a public company officer and director.