John McAfee, a businessman, computer programmer, and the founder of the software company McAfee Associates, is facing two separate lawsuits filed by the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC).
On Monday afternoon, the DOJ announced the unsealing of an indictment charging McAfee with “tax evasion and willful failure to file tax returns.”
According to DOJ Principal Deputy Assistant Attorney General Richard E. Zuckerman said McAfee has been arrested in Spain. The U.S. government is seeking his extradition from the Spanish government.
DOJ’s allegations against McAfee
In the indictment, McAfee allegedly made millions of dollars from consulting work, speaking engagements, selling the rights to his life for a documentary, and promoting cryptocurrencies. He allegedly failed to file tax returns despite making a significant income from 2014 to 2018.
The tech titan allegedly committed tax evasion by directing his income be paid into bank accounts and cryptocurrency exchange accounts in the names of nominees. He also allegedly tried to hide his assets including real property, a vehicle, and a yacht in the names of other people as part of his effort to evade the Internal Revenue Service (IRS).
If convicted, McAfee will face a penalty of $250,000 or a maximum prison sentence of five years or both on each count of tax evasion. He will face a penalty of $100,000 or a maximum prison sentence of one year or both on each count of willful failure to file a tax return.
SEC alleged that McAfee failed to disclose that he a paid promoter of ICOs
Separately, the SEC alleged that McAfee violated federal securities laws by fraudulently promoting ICOs from at least November 2017 to February 2018.
He allegedly failed to disclose that he is receiving compensation for recommending seven ICOs to his hundreds of thousands of Twitter followers during the relevant period.
“Promoting security without disclosing that you are being paid to do so is unlawful “touting” and violates the federal securities laws. The ICOs McAfee touted raised at least approximately $41 million and McAfee made approximately
$23.2 million in secret compensation for his touts. When directly asked if he was being paid for these promotions, McAfee lied to investors by falsely denying he was being paid by the issuers,” according to the SEC in the complaint.
Additionally, the Commission alleged that the tech titan engaged in a practice called scalping of at least one digital asset security. He allegedly accumulated a large amount of digital asset security and boasted about it on Twitter without disclosing his intention to sell it.
The SEC also named McAfee’s driver Jimmy Gale Watson, Jr. as a defendant in the case.
In a statement, SEC Cyber Unit Chief Kristin Litman 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.”
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