Release Number 8558-22
Federal Court Orders Texas Man to Pay Over $290,000 for Manipulative and Deceptive Digital Asset Pump-and-Dump Scheme
July 18, 2022
Washington, D.C. — The Commodity Futures Trading Commission today announced the U. S. District Court for the Southern District of New York entered a consent order on July 14 for a permanent injunction, monetary sanctions, and disgorgement of ill-gotten proceeds against Jimmy Gale Watson of Dallas, Texas.
The consent order resolves the claims against Watson in the CFTC action filed against Watson and John David McAfee on March 5, 2021 that alleged they engaged in a manipulative and deceptive digital asset “pump-and-dump” scheme. [See CFTC Press Release 8366-21]
The order requires Watson to disgorge over $146,000 he received in ill-gotten gains from the scheme and also to pay an equal amount in a civil monetary penalty. The order also permanently prohibits Watson from engaging in further violations of the Commodity Exchange Act (CEA) and CFTC regulations as charged, and it imposes registration and trading bans.
“The CFTC will continue actively to use its enforcement authority in the digital asset space to combat fraud and manipulation,” said CFTC Acting Director of Enforcement Gretchen Lowe.
As found in the order, Watson participated in the scheme by assisting in the strategic selection of suitable digital assets. As is typical of pump-and-dump schemes, he also secretly accumulated positions in digital assets in anticipation of price spikes following the misleading social media endorsements that touted the assets. These endorsements “pumped” the asset in order to increase demand, while deceptively concealing the previously accumulated position and the intent to promptly sell the position. He then “dumped” the digital asset by selling it into the inflated demand as price levels rose in response to the deceptive touting.
The CFTC thanks and acknowledges the assistance of the U.S. Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation, and the Securities and Exchange Commission, which conducted separate and parallel investigations.
The Division of Enforcement staff members responsible for this case are David M. Oakland, Christopher Giglio, Alejandra de Urioste, K. Brent Tomer, Lenel Hickson, Jr., and Manal M. Sultan as well as former Enforcement staff member Gates Hurand. The Division’s Digital Assets Task Force assisted with this matter.
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Customers and other individuals can report suspicious activities or information, such as possible violations of commodity trading laws, to the Division of Enforcement via a toll-free hotline 866-FON-CFTC (866-366-2382), file a tip or complaint online, or contact the CFTC Whistleblower Office. Whistleblowers are eligible to receive between 10 and 30 percent of the monetary sanctions collected paid from the CFTC Customer Protection Fund financed through monetary sanctions paid to the CFTC by violators of the CEA.