Mining

John McAfee-Linked Bitcoin Mining Firm Hit with Lawsuit over Pump-and-Dump Scheme

from CCN.com 5 years ago 0 0 1419

MGT Capital Investments, a bitcoin mining and cryptocurrency investing firm formerly associated with John McAfee, has been hit with a class-action lawsuit over allegations that its former CEO participated in a pump-and-dump scheme that manipulated the price of MGT shares.

Bitcoin Mining Firm Faces Class-Action Suit

The suit, which was filed by Rosen Law Firm on behalf of current and former MGT shareholders who purchased MGT securities between Oct. 2015 and Sept. 2018, follows a Securities and Exchange Commission (SEC) investigation into a stock-pumping scheme that involved former MGT Capital CEO Robert Ladd, who stepped down after being named in the complaint.

That pump-and-dump operation, as CCN reported, consisted of a group of 10 investors and corporate executives including Ladd, former Riot Blockchain CEO John O’Rourke (who also tendered his resignation), and billionaire Phillip Frost, who allegedly conspired over a period of several years to generate more than $27 million in unlawful stock sales by manipulating the prices of penny stocks.

Though not explicitly named in the SEC order, it is clear from the agency’s complaint that the pump-and-dump group used dishonest promotion and manipulative stock trading to drive up the price of MGT shares, enabling them to net more than $9.4 million during a period of just two weeks.

John McAfee Named as Defendant

Some of that alleged dishonest promotion was related to MGT’s acquisition of a company owned by an unnamed “Cybersecurity Innovator,” almost certainly John McAfee. Upon joining MGT, McAfee served at various times as executive chairman and CEO up until his resignation in August 2017. While McAfee was not named as a defendant in the SEC’s complaint, he is listed as a defendant in the class-action lawsuit.

Citing copiously from the SEC order, the Rosen Law Firm’s complaint alleges that MGT and the other defendants violated the Securities Exchange Act on four counts, all involving various components of the pump-and-dump scheme.

The suit requests that the court order MGT to pay damages to shareholders affected by the manipulation of MGT shares, cover the plaintiff’s court costs, and award further relief to aggrieved parties.

When reached for comment, an MGT spokesperson told CCN that the firm has the “utmost confidence” that the suit is without merit.

“MGT has the utmost confidence that the suit filed against them is without merit,” the spokesperson said. “This is not a departure from normal affairs in securities markets when share prices are down. Previous cases along a similar vein were thrown out without prejudice.”