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Software Giant John McAfee Arrested; Charged With Tax Evasion, Crypto Scheme

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The U.S. Department of Justice’s Tax Division on Monday unsealed an indictment against antivirus software pioneer John McAfee in which the founder of cybersecurity firm McAfee was charged with a tax evasion scheme that involved the concealing of his assets by having his income be paid into cryptocurrency exchange and bank accounts under other people’s names.

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In announcing the June 15 indictment, the DOJ said Monday that it unsealed the indictment following McAfee’s arrest in Spain, where he is awaiting extradition. McAfee was accused of, from 2014 to 2018, earning millions of dollars in income from promoting cryptocurrencies and other work but not filing tax returns.

If he is convicted, he faces a maximum sentence of five years in prison on each count of tax evasion and a maximum sentence of one year in prison on each count of willful failure to file a tax return, DOJ said, adding he also faces a period of supervised release, restitution and monetary penalties.

Separately, the Securities and Exchange Commission charged McAfee with promoting investments in initial coin offerings to his Twitter followers without disclosing that he was paid to do so. McAfee’s bodyguard, Jimmy Watson Jr., was also charged with participating in the alleged scheme, the SEC said.

In a complaint filed in U.S. District Court for the Southern District of New York in Manhattan Monday, the SEC said McAfee promoted multiple ICOs on Twitter, allegedly pretending to be impartial and independent even though he was paid over $23 million in digital assets for the promotions.

When certain investors asked whether he was paid to promote the ICOs, McAfee allegedly denied receiving any compensation from the issuers, the SEC said.

The complaint also alleged that McAfee made other false and misleading statements, including a claim he had personally invested in some of the ICOs and that he was advising certain issuers.

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The complaint alleged Watson assisted McAfee by negotiating the promotion deals with the ICO issuers, helping McAfee cash out the digital asset payments for the promotions, and, in the case of one of the ICOs McAfee was promoting, having his then-spouse tweet interest in the ICO.

Watson was allegedly paid at least $316,000 for his role. However, according to the complaint, while McAfee and Watson profited, investors were left holding digital assets that the SEC says are now essentially worthless.

McAfee and Watson also allegedly engaged in a separate scheme to profit from a digital asset security by secretly accumulating a large position in McAfee’s accounts, claiming that security on Twitter while intending to sell it, and then selling McAfee’s holdings as the price rose, the SEC claimed.

“Potential investors in digital asset securities are entitled to know if promoters were compensated by the issuers of those securities,” according to Kristina Littman, Cyber Unit chief.  “McAfee, assisted by Watson, allegedly leveraged his fame to deceptively tout numerous digital asset securities to his followers without informing investors of his role as a paid promoter,” she claimed.

The SEC’s complaint charged McAfee and Watson with violating antifraud provisions of the federal securities laws, McAfee with violating the anti-touting provisions, and Watson with aiding and abetting McAfee’s violations. The complaint seeks permanent injunctive relief, conduct-based injunctions, return of allegedly ill-gotten gains and civil penalties. The SEC also seeks to bar McAfee from serving as a public company officer and director.

McAfee and the internet company Future Tense Central, with which he is currently affiliated, did not immediately respond to requests for comment. He resigned from software company McAfee in 1994.

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