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Cybersecurity pioneer McAfee arrested for U.S. tax evasion

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Elusive cybersecurity pioneer John McAfee was arrested in Spain for tax evasion in the U.S., the Justice Department in Washington said.

McAfee is accused of failing to file U.S. tax returns from 2014 to 2018 and hiding assets including real estate, a vehicle and a yacht in the name of others, prosecutors said. An indictment returned in June was unsealed on Tuesday after he was taken into custody. He’s being held pending extradition, the Justice Department said.

He was arrested on Oct. 3 at Barcelona airport while traveling to Istanbul, according to an official at Spain’s national police force, who can’t be identified under internal policies.

John McAfee, founder of McAfee Associates Inc. and chief cybersecurity visionary at MGT Capital Investments Inc., speaks during a Bloomberg Television interview.

U.S. prosecutors claim McAfee earned millions of dollars through the promotion of cryptocurrencies, speaking engagements, consulting jobs and the sale of the rights to his life story for a documentary, but never filed tax returns. Instead, his income was paid into accounts held in the names of others, prosecutors claim. He faces as long as five years in prison if convicted of tax evasion and a year if found guilty of failing to file taxes.

It’s the latest legal complication for the eccentric software mogul, who was a person of interest in a murder in Belize, though not charged with a crime, and last year he was detained in the Dominican Republic for entering the country with a cache of firearms and ammunition. He was also briefly a candidate for president in this year’s U.S. election, ending his run from abroad in March.

The criminal charges were announced just hours after the U.S. Securities and Exchange Commission sued McAfee for promoting the sale of cryptocurrencies without disclosing that he was being paid to do so.

The commission claims McAfee recommended at least seven initial coin offerings to his Twitter followers from at least November 2017 to February 2018 without revealing that he earned more than $23 million to boost them. He’s also accused of denying that he was being paid when asked by investors.

The SEC is seeking to force McAfee to disgorge all his ill-gotten gains, and to prohibit him from taking part in the issuance, purchase or sale of any digital asset securities and unspecified monetary penalties.

McAfee didn’t immediately respond to a request for comment.

The commission also accused McAfee of claiming to be an investor or technical advisor, “creating the impression that he had vetted these companies, that they were benefiting from his technical expertise, and that he was willing to invest in the ventures.”

When a blogger exposed that he was being paid, McAfee was still holding “virtually worthless” securities from the offerings he promoted and encouraged investors to buy them -- without revealing that they were his own securities and he had paid a third party to recommend them, according to the complaint.

McAfee also engaged in a practice called scalping, in which he accumulated large amounts of digital securities and promoted them on Twitter without disclosing his intention to sell, the SEC said.

McAfee founded his eponymous software firm in 1987. Intel Corp., seeking to build security features directly into its chips, bought the company for $7.7 billion in 2010, with TPG and Thoma Bravo taking stakes later. In 2016, Intel announced that it had signed a deal to transfer a 51% stake in the business to TPG for $1.1 billion. The company filed to go public last month.

— With assistance from Olga Kharif, Thomas Gualtieri and Laura Millan Lombrana

Bloomberg News
Tax crimes Cyber security Tax evasion Cryptocurrencies SEC
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