John McAfee, the cybersecurity entrepreneur and two-time U.S. presidential candidate, has been arrested in Spain on charges of tax evasion and illegally promoting initial coin offerings (ICOs) without disclosure, the U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC) announced jointly on Monday.
SEC Alleges $23.1 Million in Undisclosed ICO Promotions
The SEC charged McAfee, 74, and his bodyguard Jimmy Watson Jr. with fraudulently pumping ICOs from at least November 2017 to February 2018. According to the SEC complaint, McAfee leveraged his fame and approximately 784,000 Twitter followers to recommend at least seven ICOs, receiving more than $23.1 million in undisclosed compensation. The agency detailed that McAfee was paid over $11.6 million in Bitcoin and Ether, plus an additional $11.5 million worth of the promoted tokens. He lied to investors when directly asked whether he was paid, falsely denying any compensation.
The SEC noted that the ICOs touted by McAfee raised at least $41 million, and his recommendations were materially false and misleading. After a blogger exposed his paid promotions in February 2018, McAfee resorted to a practice known as "scalping": he still held a large number of virtually worthless securities from the previously touted ICOs, paid a third party to pump them, and encouraged investors to buy while secretly selling his own holdings. The SEC seeks disgorgement of all ill-gotten gains, civil penalties, and a permanent ban on McAfee serving as an officer or director of any public company or participating in digital asset securities offerings. Watson, who substantially assisted in the schemes, received at least $316,000 from McAfee for his role.
DOJ Indicts McAfee for Tax Evasion
Separately, the DOJ unsealed a June 15, 2020 indictment charging McAfee with tax evasion and willful failure to file tax returns from 2014 to 2018. During this period, McAfee received millions of dollars in income from promoting cryptocurrencies, consulting work, speaking engagements, and selling the rights to his life story for a documentary. He allegedly evaded taxes by directing income to bank and cryptocurrency exchange accounts held in nominees' names, and by concealing assets, including real property, a vehicle, and a yacht, in the names of others.
If convicted, McAfee faces a maximum sentence of five years in prison on each count of tax evasion and one year on each count of willful failure to file a return, plus supervised release, restitution, and monetary penalties. McAfee had previously stated he refuses to pay taxes, tweeting in February 2020: "Tax evasion is misrepresentation of income. I have never done that. I merely refuse to pay." He had been living in exile on a boat since early 2019 after being charged with using cryptocurrencies in criminal acts.
Background and Reactions
McAfee was arrested in Spain on September 28, 2020, after tweeting that he was visiting to "check the progress of the Mud Wrestling Arena I'm building." He is pending extradition to the United States. Known for his confrontational style, McAfee had previously warned that he would not submit to the SEC, saying in December 2018: "I am not Elon Musk – I'm John Fucking McAfee. Watch the difference." His legal team has not yet commented on the latest charges. This case marks one of the most high-profile enforcement actions against celebrity crypto promoters and tax offenders, underscoring the SEC and DOJ's commitment to pursuing fraud in the digital asset space.