Equibit plays damage control with John McAfee as seed round looms

John McAfee

Yesterday, BetaKit and its sister site MobileSyrup jointly published a story about Equibit’s claims of John McAfee joining the Toronto-based blockchain security startup as chief security officer — with McAfee offering a vehement denial.

Today, BetaKit spoke with Equibit CEO Chris Horlacher about the confusion.

Horlacher said that McAfee will continue to work with Equibit as an advisor (BetaKit confirmed this with McAfee). Horlacher also claimed that the confusion came from Fortune misunderstanding Equibit’s initial press release, with Fortune not contacting McAfee or Horlacher for clarification. (Fortune actually syndicated the story from VentureBeat, ed.).

For context, BetaKit has posted Equibit’s full press release at the end of this article, which in our opinion differs in no substantive way from VentureBeat or BetaKit’s initial reporting.

Horlacher confirmed McAfee wasn’t happy with the Fortune/VentureBeat article (see McAfee’s thoughts on the matter here), but would continue to work with Equibit. Horlacher also claimed that the role was never supposed to be a paid employee contract.

“What John can do is very obvious to anybody who looks at his experience and track record. As far as his personal life goes, I don’t think it’s any of my business.”

“That’s why it was set up that he would report directly to the board. He wasn’t going to be my employee sitting under the CEO; it’s a board-appointed advisory role, so he would act independently from CEO. Traditionally in an internal audit dept, the head of internal audit doesn’t report to the CEO or anyone in the C-Suite. They go straight to the board because what they might find is that it could impact the profitability of a corporation. This is a conflict of interest that could exist between internal audit and the CEO, who is supposed to be concerned with ongoing profitability of the company.”

Horlacher said that the reason why Equibit called McAfee a CSO is to highlight the importance of his role, which Horlacher felt is just as important as the CEO.

“We’re experimenting with new forms of corporate governance, but in a firm that places security in such an important piece of what we do. To me, the CSO is every bit as important as the CEO,” said Horlacher.

When asked repeatedly by BetaKit why Equibit would promote a title for McAfee that contradicts the traditional understanding of the role of CSO (significantly by McAfee himself), Horlacher said only that they aren’t a traditional firm.

“These types of operations have never existed before. For me, I’m also chairman of the board and I wanted to create… we’re creating the best practices as we go,” Horlacher said. “So for something like this, we wanted the CSO to sit at the same level as the CEO because of the aforementioned possible conflict of interest.”

“That’s how I saw the relationship. It’s not unusual for the head of internal audit to be at that same level. So with the importance we were placing on John’s role, we wanted to make sure that he would have free rein to do what he needed to do and report his findings without interference from anyone.”

Over email yesterday, Horlacher initially had this to say about McAfee’s role:

“He will be conducting regular penetration testing of our software and infrastructure. If he finds anything, EDC will, of course, move to remedy the situation as quickly as possible. We take our role as custodians of our user’s information and private keys very seriously,” said Horlacher.

In a phone interview with McAfee yesterday, the security expert offered this response:

“I told them early on that if they needed a pen tester [penetration tester, ed.] I would try to find one for them. I am CEO of a public company in America. How on earth would I find the time to do pen testing for some other company. That’s a full-time job requiring many months.

“I would be advising their board, absolutely. I advise boards of more companies than I can count. Yes, that part was true.

“How could I do audits for them? I would have to go to Canada. I’d have to spend months there. It would take a team of people. Again, I have a full-time job. Which is more than a full-time job. It’s inconceivable and absurd to think I can actually do that [act as CSO]. And again for free!

“All I did was offer advice to the board; the board can call me, they could ask questions. It’s usually very trivial and takes a few seconds but absolutely at no point did I imply that I would be doing real work.”

Equibit says it is now creating a security advisory committee that McAfee will be a member of. “We didn’t intend on creating a whole committee just for one person, but now we imagine that we can nominate and add additional security advisors because security is the top concern at EDC,” Horlacher said.

“All I did was offer advice to the board. At no point did I imply that I would be doing real work.” – John McAfee

“We’re building something sensitive and we want to be sure we’re setting the standard, we’ve certainly leapfrogged over most of the competition in the cryptocurrency space and even in the banking industry; a lot of banks don’t use the kind of security we have at the moment. We haven’t even started adding in John McAfee’s solutions like the Sentinel device.”

Horlacher said that, contrary to McAfee’s claim that the two parties haven’t been in contact since “two months ago,” Horlacher has been in touch with McAfee’s communications director as early as last week to co-ordinate getting a statement from McAfee to use. In a meeting with BetaKit today, Horlacher played parts of a recorded conversation with the communications director to confirm.

Horlacher also said that he sent the communications director a summary via e-mail of his McAfee’s role as ‘chief security officer’ on August 12, which included the expectation that McAfee would help the company find a pen tester. “I never expected him to personally do anything. I just wanted him to guide us through this,” Horlacher said today, contradicting his prior statements above.

Significantly, a portion of the recorded conversation played to BetaKit contained this statement from Horlacher: “We’re getting everyone lined up on our side as quickly as possible, and any traction you guys can help me get to get some investors south of the border would be phenomenal,” Horlacher said. McAfee’s comms director confirmed on the call that EDC could be part of a website listing MGT’s strategic partners.

Horlacher denied that his decision to call McAfee CSO was related to his decision to open a seed round. “We began talking to him about taking that position long before we planned on opening seed round. It’s about building these relationships and partnering with people who are the best at what they do,” he said.

BetaKit sister-site MobileSyrup contacted McAfee through Twitter to confirm what Horlacher said, as well as knowledge that employee’s correspondence were being recorded. “I will continue to advise the board. I have no title and no salary,” McAfee replied.

John McAfee

Lost in the confusion of McAfee’s actual role with Equibit are questions surrounding the efficacy of having someone facing allegations of murder and sexual assault connected with the company at all. Horlacher said that when it came to McAfee’s alleged drug use, he wasn’t particularly concerned with what someone does in their private time.

“What John can do is very obvious to anybody who looks at his experience and track record. As far as his personal life goes, I don’t think it’s any of my business.”

BetaKit asked Horlacher again if the company considered allegations of murder and sexual assault against McAfee, relayed in detail in a recent Showtime documentary.

“John has done a pretty good job of rebutting that. I’m an auditor so I go with the evidence, and I didn’t see any evidence presented by the people in Showtime, it was all basically hearsay. And some of that hearsay John proved was paid for by the Showtime directors.”

“That throws a lot of doubt into the allegations. Until anybody sees any actual evidence I don’t think there’s any reason not to take John at his word because he certainly has made his defense.” As for how the women on Equibit’s team would feel about McAfee joining the team, Horlacher said they had no women on the team at the moment, rebutting that, “there’s women on John’s team, and they all support him.”

Equibit Development Corporation (EDC) has announced IT security legend John McAfee, founder of McAfee Associates and currently CEO of MGT Capital Investments, has been appointed the company’s Chief Security Officer.

“Equibit Development Corporation has positioned itself to become a major player in the blockchain development field focused on the financial sector,” said McAfee. “With my guidance and advice I anticipate the company to experience stellar growth and achievements.”

McAfee will report directly to EDC’s board of directors, and oversee the security of EDC’s applications and managed services for the financial industry.

“We’re honoured and thrilled to be working with John McAfee. With his input and ongoing guidance, EDC will continue to set the security standard for blockchain services,” said CEO, Chris Horlacher. “We share his unwavering commitment to IT security and, with his help, will continue to push the boundaries of what’s possible in this industry.”

Equibit Development Corporation completed the installation of its first supernode, which will handle private key generation, encryption, decryption and digital signatures in hardware rather than software. EDC plans to introduce a web application built atop the supernode, giving users easy access to the Equibit network and unrivalled security over their private keys. Institutions will also be able to access the supernode through an API.

Certified under the Federal Information Processing Standard (FIPS), Horlacher said that its supernodes provide unparalleled security and the Equibit network, once functional, will offer uninterrupted over-the-counter trading, with unforgeable equities, market information, compliance tools, and streamlined investor messaging.

“Blockchain technology has the potential to reinvent the securities industry,” Horlacher said. “With Equibit, issuers can securely communicate with their shareholders, collect votes, distribute earnings, and update their shareholder registers in real-time, at little to no cost.”

The company is holding a crowdsale for its equibit tokens in January 2017. Twenty-one million tokens will ultimately be made available, with a pre-sale on the first million.

Jessica Galang

Jessica Galang

Freelance tech writer. Former BetaKit News Editor.

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