Software pioneer John McAfee faces US tax evasion charges

The US authorities have charged John McAfee, businessman and cyber software expert, with tax evasion and wilful failure to file tax returns for four years, claiming he diverted his income into hidden bank accounts and concealed assets

The announcement follows McAfee’s arrest in Spain where he is pending extradition.

According to the US Justice Department, McAfee earned millions in income from promoting cryptocurrencies, consulting work, speaking engagements, and selling the rights to his life story for a documentary. From 2014 to 2018, McAfee allegedly failed to file tax returns, despite receiving considerable income from these sources.

The indictment does not allege that during these years McAfee received any income or had any connection with the anti-virus company bearing his name.

The US authorities allege that McAfee evaded his tax liability by directing his income to be paid into bank accounts and cryptocurrency exchange accounts in the names of nominees.  He allegedly attempted to evade the Internal Revenue Service 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 a maximum sentence of one year in prison on each count of wilful failure to file a tax return.

Additionally, the Securities and Exchange Commission (SEC) has brought charges against McAfee for promoting investments in initial coin offerings (ICOs) to his Twitter followers without disclosing that he was paid more than $23m in digital assets to do so.

McAfee’s bodyguard, Jimmy Watson, is also charged for his role in the alleged scheme.

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

The regulator alleges that McAfee made other false and misleading statements, such as claiming that he had personally invested in some of the ICOs and that he was advising certain issuers.

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

The bodyguard was allegedly paid at least $316,000 for his role.

According to the SEC’s complaint, while McAfee and Watson profited, investors were left holding digital assets that 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, touting that security on Twitter while intending to sell it, and then selling McAfee’s holdings as the price rose.

Kristina Littman, the SEC cyber unit chief, said: ‘Potential investors in digital asset securities are entitled to know if promoters were compensated by the issuers of those securities.

‘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.’

McAfee and Watson are charged 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.

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