An early Bitcoin investor from Austin, Texas, has become the first person in the United States convicted of tax evasion related to cryptocurrency earnings. According to the U.S. Department of Justice (DOJ), Frank Richard Ahlgren III failed to report $3.7 million in capital gains.
Investments and Underreported Profits
Reports indicate that Ahlgren began buying BTC in 2011. In 2015, he purchased 1,366 BTC at under $500 per coin. In October 2017, he sold 640 BTC at an average price of $5,807 each, netting $3.7 million. He invested the proceeds in real estate but significantly understated the Bitcoin cost basis in his 2017 tax return, concealing the true amount of his gains.
The DOJ adds that Ahlgren also failed to declare over $650,000 in Bitcoin sales in 2018 and 2019. To hide his assets, he used complex chains of wallet transfers, crypto mixers, and cash transactions. Notably, in 2014, Ahlgren wrote a blog post detailing how to use mixers to increase the anonymity of crypto transactions.
Sentence and Penalty
This is the first U.S. criminal case involving tax evasion solely linked to cryptocurrency. Lucy Tan, a representative of the IRS, stressed that their team has the tools and expertise to trace financial flows in both crypto and fiat.
“Ahlgren will serve his sentence because he believed his crypto transactions were untraceable,” she said.
Acting Deputy Assistant Attorney General Stuart Goldberg stated that Ahlgren’s attempts to conceal income resulted in over $1 million in tax losses to the government. The court sentenced him to two years in prison, one year of supervised release, and ordered restitution of $1.1 million.
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