Austin, Texas man Frank Richard Ahlgren III was sentenced to two years in prison for filing false tax returns that failed to report the capital gains from selling $3.7 million worth of bitcoin, the United States Department of Justice (DOJ). name today.
According to the DOJ, Ahlgren was an early Bitcoin investor who started buying bitcoin in 2011. In 2015, he received 1,366 bitcoins through his Coinbase account, a year in which the price of bitcoin peaked at around at $495 per coin. By October 2017, the value of Bitcoin had increased, and Ahlgren sold 640 bitcoins for $5,807 each, with a total profit of $3.7 million. He then used the money to buy a home in Park City, Utah.
However, when he filed his 2017 tax return, Ahlgren misrepresented the gains by inflating the cost basis of his bitcoin purchases, saying he had acquired the coins at prices above market rates. This negative reporting significantly reduced the reported capital gains.
Between 2018 and 2019, Ahlgren sold additional bitcoins worth more than $650,000 but did not fully report these transactions on his tax returns. In an effort to hide his gains, he moved money through multiple wallets, exchanged bitcoin for cash in person, and used mixers to make his bitcoin transactions anonymous.
In total, the DOJ said Ahlgren's actions resulted in tax losses exceeding $1 million.
“Frank Ahlgren III made millions buying and selling bitcoins,” said Acting Assistant Attorney General Stewart M. Goldberg of the Justice Department's Tax Division “But instead of paid the taxes he knew was due, lied to his accountant about the amount of his large portion of his profits, and tried to hide another portion of his profits through sophisticated means which went designed to hide its transactions on the bitcoin blockchain. That behavior today earned him a two-year sentence.”
U.S. District Court Judge Robert Pitman sentenced Ahlgren to two years in prison, followed by one year of supervised release. In addition, Ahlgren was ordered to pay $1,095,031 in restitution to the US government.
“Ahlgren serves time because he believed his cryptocurrency transactions were untraceable. This case shows that no one is above the law. My team at IRS Criminal Investigation has the knowledge and tools to track financial activity, whether it involves dollars, pesos, or digital currency,” said Agent Acting Special Lucy Tan of the IRS-Criminal Investigation (IRS-CI) Houston Field Office. . “This case marks the first prosecution of criminal tax evasion based solely on digital currency. As cryptocurrency prices are high, so is the temptation to not pay sales tax. Avoid the temptation and avoid federal prison. “
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