John McAfee arrested, indicted on tax evasion charges, sued for fraud

McAfee allegedly did not pay taxes on $23M he earned by allegedly committing fraud.

Kate Cox – Oct 6, 2020 1:20 pm | 154

John McAfee gesticulating on his yacht outside Havana, Cuba, during an interview with AFP in June 2019. Credit: Adalberto Roque | AFP | Getty Images

Noted cybersecurity eccentric John McAfee is under arrest in Spain awaiting extradition to the United States after being indicted on federal tax evasion charges.

The Department of Justice unsealed the indictment (PDF) yesterday following McAfee’s arrest by Spanish authorities at Barcelona’s airport over the weekend.

The filing alleges that McAfee deliberately not only avoided paying federal taxes from tax years 2014 through 2018 but also tried to hide considerable assets from the IRS. He allegedly hid those assets—including a yacht, a vehicle, real estate, bank accounts, and cryptocurrency—by purchasing and titling them under “the name of a nominee.”

McAfee in the past has effectively dared the IRS to come get him. In 2019, he went on a Twitter screed calling taxes “illegal” and claiming he had not filed a federal tax return in eight years. “I am a prime target for the IRS,” he concluded. “Here I am.”

Neither the DOJ’s press release nor the indictment specify how much McAfee made or owed, saying only he “earned millions” from “promoting cryptocurrencies, consulting work, speaking engagements, and selling the rights to his life story for a documentary.” Another regulator, however, alleges that at least $23 million of that income came from committing fraud.

The US Securities and Exchange Commission filed a lawsuit against McAfee on Monday, alleging that he fraudulently promoted multiple initial coin offerings. According to the SEC, McAfee and his bodyguard, Jimmy Watson Jr., promoted ICOs on Twitter “pretending to be impartial and independent even though he was paid more than $23 million in digital assets” to make those promotions.

The complaint (PDF) claims that Watson helped McAfee negotiate the payments, inflate the value of the ICOs, and cash out the payments so that McAfee profited while “investors were left holding digital assets that are now essentially worthless.” The SEC also alleges that when investors asked outright if McAfee was paid to promote those ICOs that he lied and said no, as well as making other false and misleading statements about his promotions.

If he is found guilty of the tax charges, McAfee could face up to five years in prison and a fine of $250,000 on each of the five counts of tax evasion and up to one year in prison and a fine of up to $100,000 on each of the five counts of willful failure to file a tax return, the DOJ said. The SEC suit seeks injunctive relief—i.e., a ruling banning McAfee from participating in cryptocurrency—as well as the “return of allegedly ill-gotten gains” and payment of fines.

McAfee’s wild ride

McAfee founded his eponymous computer security firm in 1987 and ran it until 1994. (Intel acquired the company in 2011, then sold it to a private equity firm in 2017.) Since departing the firm 25 years ago, he has been better known for his outlandish claims and international escapades than his software work. This is far from his first arrest.

McAfee moved to Belize in the 2000s, seemingly to avoid a wrongful death suit in the US. In 2012, authorities in Belize named him the prime suspect in the murder of another US expat. He abruptly left Belize and resurfaced in Guatemala several weeks later, where he was arrested for entering the country illegally. In 2018, a Florida court found McAfee liable for the Belize death in a wrongful death suit.

In early 2013, he resurfaced in Portland, Oregon, and claimed to have been running a massive spy network in Belize that allegedly uncovered just about every kind of scandal you can imagine. Two years later, he threw his hat into the ring for the 2016 US presidential election as a candidate for the Libertarian Party. (Gary Johnson ultimately became the Libertarian nominee.)

He also had a run-in with authorities in the Dominican Republic in 2019, when authorities detained McAfee and his wife for four days after seizing several firearms from their yacht. Dominican authorities determined the US had no active warrants or extradition requests out for McAfee at the time and so released him on his way to the UK, according to Reuters.

McAfee last spoke with Ars in 2016, discussing his offer to the FBI to personally crack the iPhone used by the deceased San Bernardino shooter in 2015. The Feds and Apple ended up in a protracted legal tangle about encryption on phones as a result of that case, an argument Attorney General Bill Barr is still pursuing.