A Texas man has landed in jail for failing to report large gains on his crypto trades to U.S. tax authorities.
On Thursday, the U.S. Department of Justice (DoJ) said Frank Richard Ahlgren III of Austin, Texas had been sentenced to two years in prison, one year of supervised release and ordered to pay US$1.1 million in restitution to the U.S. government for filing a false tax return that didn’t report his capital gains on US$4 million worth of bitcoin.
According to court filings, Ahlgren bought bitcoin as early as 2011, and in 2015, he purchased 1,366 bitcoin through his accounts on Coinbase. He sold almost half of his holdings in 2017 for US$3.7 million and used the proceeds to buy a house.
Authorities alleged that he misrepresented these transactions on his 2017 tax return, claiming that he paid much more for the bitcoin than he actually did, thereby underreporting his true capital gain from his sale of bitcoin.
The DoJ also alleged that Ahlgren didn’t report further profitable trades in 2018 and 2019.
“For these years, Ahlgren took several sophisticated steps to attempt to conceal his transactions on the bitcoin blockchain by moving his bitcoins through multiple wallets, meeting an individual in person to exchange bitcoins for cash, and using mixers, which are designed to conceal the individual who made the particular transaction,” it said.
The case marks the first criminal tax evasion prosecution focused solely on cryptocurrency, said Lucy Tan, acting special agent in charge of the Houston office of the Internal Revenue Service’s criminal investigations division.
“As the prices for cryptocurrency are high, so is the temptation to not pay taxes on its sale. Avoid the temptation and avoid federal prison,” Tan said in a release.