Business 3 October 2018Dennis Wafula
McAfee-linked MGT Capital Investments faces lawsuit over pump-and-dump scheme
Shareholders of crypto mining and investing firm MGT Capital Investments, which has previous ties to John McAfee, have filed a class-action lawsuit against the company over allegations of a pump-and-dump scheme that manipulated the price of MGT shares.
The lawsuit comes on the heels of a U.S. Securities and Exchange Commission (SEC) probe into a stock-pumping scheme involving a group of 10 investors and corporate executives, including former MGT Capital CEO Robert Ladd, former Riot Blockchain CEO John O’Rourke, and billionaire Phillip Frost.
John McAfee, who served as executive chairman and CEO of MGT Capital until his resignation in August 2017, was not named in the SEC investigation. However, he was named a defendant in the class-action lawsuit filed by Rosen Law Firm on behalf of current and former MGT shareholders.
According to the lawsuit, the defendants failed to disclose that they “were engaged in a pump-and-dump scheme to artificially inflate MGT Capital’s stock price,” that the “illicit scheme caused MGT Capital to make false and misleading statements, which would result in governmental scrutiny, including from the SEC,” that “the illicit scheme would ultimately cause MGT Capital’s stock to become delisted from” the New York Stock Exchange, which means that their statements regarding MGT Capital’s business prospects “were materially false and misleading and/or lacked a reasonable basis at all relevant times.”
The suit is asking the court to order MGT Capital to pay damages to the shareholders who were affected by the alleged manipulation of MGT shares, as well as cover the plaintiff’s court costs, and award further relief to aggrieved parties.
Recently, CoinGeek reported that McAfee has ceased promoting ICOs due to threats from the SEC.
Though not explicitly named in the SEC order, the complaint indicated that the defendants used dishonest promotion and manipulative stock trading to drive up the price of MGT shares, enabling them to net more than $9.4 million in just two weeks. However, MGT tells CCN that the firm has the ‘utmost confidence’ that the suit is without merit and that it will be dismissed.
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