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Crypto and Cybersecurity Inventor John McAfee Arrested in Spain

Crypto and Cybersecurity Inventor John McAfee Arrested in Spain

Published: October 16th, 2020

Millionaire tech entrepreneur John McAfee is on remand in Barcelona awaiting US extradition, where he could face up to 30 years in jail.

The controversial founder of the antivirus company that bears his surname was arrested at Barcelona’s El Prat airport on Saturday to answer allegations that he’s evaded millions of dollars in taxes on undeclared income from activities such as illicitly promoting cryptocurrencies.

Last week, the US Department of Justice unsealed an indictment that says the eccentric millionaire and ICO promoter kept cryptocurrency and other assets hidden in secret bank accounts.

The US Securities and Exchange Commission (SEC) also filed a complaint in US District Court against the entrepreneur, saying he secretly made over $22 million for his part in promoting a series of initial coin offerings (ICOs), as well as through the sale of the rights to his life story, the Financial Times reported.

Authorities say McAfee kept his role as a compensated endorser secret

The DoJ indictment says McAfee failed to pay taxes from 2014 to 2018. Moreover, it says that he hid his earnings by moving income though cryptocurrency accounts registered in another person's name.

The SEC's civil suit includes former McAfee CEO James Watson, who also acts as McAfee’s sometime bodyguard, and details how much tax McAfee should have been paying on his cryptocurrency earnings.

The suit claims McAfee promoted eight ICOs without revealing he had been a paid endorser. He received payment for his role in seven.

Combined, the ICOs raised over $4 million. McAfee is alleged to have pocketed $11.6 million in Ether and Bitcoin for his efforts, plus $11.4 million from tokens associated with the seven projects. For his part, Watson earned $316,000 for what the SEC calls ‘scalping’ of securities, quickly selling coins after promoting them aggressively.

The SEC’s suit claims that McAfee lied to investors, which a breach of Section 17 of the US Securities Act, as well as Section 10 of the Securities Exchange Act, when he claimed he was being paid directly by the projects.

‘The defendant wrongly claimed to be a technical advisor and/or investor when he promoted the ICOs, giving the impression that the companies were benefitting from his expertise, that he had personally analysed the companies, and that based on that he was willing to invest in the ventures with his own funds. In fact, McAfee’s social media posts on behalf of the ICOs were paid promotions masquerading as investment advice from an impartial expert.’

McAfee has been outed by journalists at one stage, says the SEC, which created a problem: McAfee was left holding a cache of now-worthless coins from the ICOs. To recoup his losses McAfee allegedly touted the tokens to inflate their value.

"To make it possible to cash out, McAfee told investors they should buy the securities sold by some of the ICOs but didn’t say that he was trying to sell his own holdings at the same timer. Nor did he disclose that he had paid another promoter to hype the securities."

The complaint does not name the ICOs, which occurred between December 2017 and early 2018.

A crypto P.T. Barnum

Overall, the joint complaints paint a picture of McAfee as a modern-day Circus barker, offering his reputation as an IT expert and iconoclast to the highest bidder. He provided his services to the crypto set, using the then-spiking price of Bitcoin price to generate more publicity for himself.

‘McAfee made florid and exaggerated social media posts, for example, tweeting predictions about BTC prices and famously promising to 'eat [his] d**k on national television' if the forecasts failed to pan out. Media interviews about his BTC comments generated a massive amount of press coverage, particularly inside the crypto community.’

On the back of his rising profile in crypto circles, says the SEC, token projects contacted him to act as a paid endorser, and McAfee was able to trade on his newfound influence to enrich himself and his cronies.

The SEC wants the courts to compel both McAfee and Watson to hand over all ‘ill-gotten gains’ they secured for their role in the schemes and to pay pre-judgment interest alongside whatever civil penalties are levied against them. The agency also wants to bar McAfee forever from taking part in future digital asset security sales, and recuse himself from ever serving as an officer or director of a business that offers securities.

McAfee faced initial questioning by a judge via videoconference. When the session ended, the Spanish magistrate ordered him to be kept in custody while his extradition order was processed. He’s currently on remand in Barcelona’s Brians prison, in Sant Esteve Sesrovire.

The final chapter for one of tech’s top iconoclasts?

After McAfee sold his antivirus company for €6.4 billion to Intel in the early 00’s he’s had numerous scrapes with the law. In 2012, he left Belize in a rush to avoid police questioning about the death of a neighbour. After laying low in neighbouring Guatemala he was later deported to the US, but no charges were ever brought concerning the Belize case.

McAfee announced in 2019 that he had fled the United States due to allegations made against him by a public prosecutor. He also told a news agency in Cuba that he had not paid US taxes for the previous eight years. He has since become something of a hero to Libertarians, stating that he ‘… will not pay taxes again, because it is unconstitutional and illegal.’ In July 2019 he was arrested in the Dominican Republic for illegally carrying weapons on his yacht.

Back in March, as the COVID-19 pandemic was spreading, McAfee was in Spain and started writing up his experiences of the country’s lockdown measures. He complained about the restrictions on his liberty and mobility, calling it “martial law” and complaining about alarmism over a virus that, at that point, looked like it might kill fewer people than the ordinary flu. He appeared in a series of videos where he could be clearly seen flouting Spanish lockdown restrictions.

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