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CRYPTOCURRENCY: FBI, DOJ go after McAfee founder for scamming investors

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CRYPTOCURRENCY: FBI, DOJ go after McAfee founder for scamming investors

One of the most prominent lawsuit in cryptocurrency history has begun, and it involves the founder of McAfee computer security software, John McAfee and the US Department of Justice (DOJ), as well as the Federal Bureau of Investigation (FBI).

McAfee was said to have deceived investors into investing in cryptocurrency in order to cash-in on their participation which will cause a price bubble. This action has led to a lawsuit against McAfee who still has a tax evasion case hanging on his head.

McAfee, according to indictment unsealed by DOJ, had promoted cryptocurrency on his social media, hyping the digital asset in order to push the price up, then sell his holdings at an expensive price.

His action is labelled pump and dump, which is an abuse of market. It is a scam activity that involves an investor purchasing large stock or crypto, which will automatically boost the price, then the investor engages in publicising the crypto price gain in order to lure more investors.

Read also: SEC, CBN to collaborate in regulating cryptocurrency market

Once participation rises, the price of the crypto will also jump, and once this happens, the investor behind the initial large purchase and publicity will dump or sell their crypto to interested buyers at the high price – due to the size of their holdings, the crypto price will crash, and no buyer will be available to buy from late investors.

Pump and dump is usually done with lesser known crypto, just like McAfee did with cryptocurrency altcoins, and he gained $2 million from the pump and dump activity. Aside from that, he also promoted Initial Coin Offering on Twitter without disclosing to his followers that he was paid for the promotion, Forbes reported.

McAfee and his cryptocurrency team advisor, Jimmy Watson Jr made $13 million from defrauding investors. US attorney Audrey Strauss said, “McAfee and Watson exploited a widely used social media platform and enthusiasm among investors in the emerging cryptocurrency market to make millions through lies and deception,” US attorney Audrey Strauss said in a release.

FBI assistant director William Sweeney said, “McAfee and Watson used social media to perpetrate an age-old pump-and-dump scheme,” adding that, “When engaging in illegal activity, simply finding new ways to carry out old tricks won’t produce different results.”

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