Man Sentenced for Tax Evasion Using Bitcoin

An Austin, Texas, man received a two-year sentence for falsely underreporting capital gains earned from selling $3.7 million in bitcoin — the first criminal tax evasion prosecution centered entirely on cryptocurrency.

Details of the Case

The false tax returns were filed by Frank Richard Ahlgren III between 2017 and 2019, failing to report or underreporting the sale of $4 million worth of bitcoin, according to court documents.

The United States Department of Justice's Office of Public Affairs noted that Ahlgren was an early bitcoin investor, purchasing it as early as 2011. He used the crypto exchange Coinbase to buy 1,366 bitcoins in 2015 and sold 640 bitcoins in October 2017, using the proceeds to buy a house in Park City, Utah.

However, Ahlgren provided a false summary to his accountant about his gains and losses, claiming he purchased bitcoin at a inflated cost. His 2017 federal income tax recorded a "substantially inflated" cost basis.

Ahlgren worked to conceal his bitcoin sales not reported on his 2018 and 2019 tax returns by using multiple wallets and exchanging bitcoin for cash in person. He also mentioned mixers in a blog post in May 2014, which were used to hide his capital gains.

Statements from Officials

"Frank Ahlgren III earned millions buying and selling bitcoins, but instead of paying the taxes he knew were due, he lied to his accountant about the extent of his gains, and sought to conceal another chunk of his profits through sophisticated techniques designed to obscure his transactions on the bitcoin blockchain," said Stuart M. Goldberg, Acting Deputy Assistant Attorney General of the Justice Department’s Tax Division.

Lucy Tan, Acting Special Agent in Charge of IRS-Criminal Investigation’s Houston Field Office, stated that this case represents the first criminal tax evasion prosecution solely focused on cryptocurrency, advising to "Avoid the temptation and avoid federal prison."