ICO pumper John McAfee has been arrested in Spain and charged with tax evasion. According to an indictment that had been sealed in June and unsealed prior to his arrest on Monday, the U.S. Justice Department alleged he evaded taxes and had deliberately not filed tax returns from 2014-2018, and is reportedly seeking to extradite him back to the United States.
The Justice Department’s indictment follows a civil charge from the U.S. Securities and Exchange Commission (SEC) saying McAfee had failed to disclose US$23.1 million in compensation for promoting seven digital asset projects, and that statements he’d made about those assets on Twitter had been materially false and misleading.
The indictment listed speaking engagements, consultancy work, selling his life story for a documentary, and “promoting cryptocurrencies” as the sources of McAfee’s millions. It alleged he had used some of the money to buy various items including real estate, a car and a yacht under others’ names to avoid paying taxes.
In its own charges, the SEC said McAfee made “materially false and misleading” public statements recommending seven initial coin offerings (ICOs) in 2017 and 2018. These statements including denials he’d been compensated to promote the coin projects. The SEC seeks to impose a civil penalty, as well as force McAfee to pay back the millions he made.
McAfee’s wife Janice, who often posts updates online if John is unavailable for some reason, responded to questions by appearing to deny her husband was in custody:
Nope, he’s with me. pic.twitter.com/TtTQ0Q96np
— Janice McAfee (@theemrsmcafee) October 5, 2020
However some replies to her tweet expressed skepticism, and John himself has not posted a message to “prove” he’s not in custody—or (at the time of writing) tweeted at all since October 3rd.
The self-fulfilling pump
McAfee has over the years been simultaneously criticized by his detractors for “pumping” the price of altcoins and tokens… and praised by trader fans who speculate on them, for the same reason.
McAfee has over a million Twitter followers, meaning any “price prediction” in either direction for a particular altcoin or token often becomes a self-fulfilling prophecy.
Whatever the technological or economic merits of a coin project, recommendations by popular public figures are usually enough to raise their speculative price high enough for early buyers to cash out—leaving latecomers holding worthless bags if/when the projects fail to gain traction (which is most of the time).
The “pump and dump” is hardly a new idea and it wasn’t unique to the ICO craze that started in 2017. However the digital asset space drew thousands of inexperienced investors and, at the same time, gave them easy access to ownership and trading platforms no matter where they lived. For more seasoned speculators, it provided a rich source of new money.
McAfee has lent his name and recommendation to various blockchain and digital asset projects over the years. Though the exact nature of his relationship with the developers is always a mystery, a few disputes that have arisen from them usually reveal allegations McAfee was paid large sums of money to generate buzz around their names.
In 2019, there was a complaint by the Chinese developers of “zombie coin” that McAfee was paid US$4.5 million to promote the asset and help write its white paper. McAfee then wrote in the disclaimer that zombie coin was the “most absurd concept in the history of crypto”and “do not invest in this shitcoin!! Under no circumstances, at any time and for any reason.” He later claimed he was mocking the SEC by explicitly not promoting sales.
McAfee, one of so-called backers and evangelists of the pseudo-Bitcoin platforms executing the coordinated attacks against the original Bitcoin, has also engaged in public spats with high profile members of the Bitcoin BSV community, notably Dr. Craig Wright. Wright referred to McAfee as “McScammer” in a blog post and has been critical of his promotional activities. In response, McAfee in mid-2019 called Dr. Wright a “Satoshi pretender soon to be unmasked” (no such “unmasking” subsequently occurred).
How McAfee got in this position
McAfee developed the antivirus software that carries his name in 1994, and later quit the company (the brand was eventually sold to Intel in 2011, and sold again in 2017).
For years an eccentric but fairly obscure personality on the technology scene, he rose to notoriety in 2012 while on the run from authorities in his adopted country of Belize, as a “person of interest” in their investigations concerning the murder of a neighbor. McAfee claimed persecution by corrupt officials he’d declined to bribe, and no connection to the murder was ever proven. Having escaped Belize and returning to the U.S., McAfee then turned his attention to digital assets.
He has cultivated a bad-boy, anarcho-capitalist image that involves frequent eccentric behavior and statements, surrounding himself with heavily-armed bodyguards, and making claims he’s in hiding from government agencies seeking to apprehend him, and/or that attempts have been made on his life by strangers, friends, and even his wife. McAfee ran brief but electorally unsuccessful presidential campaigns in 2016 and 2020.
His statements on government policy and regulation, taxes, computer security and individualism have endeared him to a certain subset of the digital asset community. While he still maintains a large following, many have grown skeptical of what they regard as attention-seeking and self promotion that generates income more than technological or regulatory change. Those who would prefer to see a more responsible and regulated digital asset industry also bemoan the reputational baggage he brings.
Reduced (or a lack of) investment regulation often gets spun as “freedom,” “reducing red tape,” or “democratizing finance,” which appeals to the unaware. However, once the unregulated space inevitably fills with bad actors, amateur investors come to understand why all that regulation existed in the first place. Bitcoin BSV promotes a regulated and responsible digital asset industry where participants are held accountable for their actions. Whether that’s “freedom” or not depends on personal points of view, but it’s the only way to avoid the scene descending into a mess of sham promoters and lost savings.