Crypto
Don't Use Cryptocurrency to Avoid Paying Taxes: Bitcoin Enthusiast Sentenced to 2 Years
First Bitcoin Investor Sentenced to Prison for Tax Evasion
A bitcoin investor has become the first person to be sentenced to prison for avoiding taxes related to cryptocurrency. Frank Richard Ahlgren III, who invested in bitcoin early on, was sentenced to two years in prison on Thursday. He tried to hide $1 million in profits from his tax returns.
Despite using various methods to cover his tracks, such as mixers, multiple wallets, and in-person cash exchanges, the authorities were able to trace his crypto transactions. Ahlgren, from Austin, Texas, began buying bitcoins in 2011 and increased his trading in 2015 when he bought about 1,366 bitcoins through Coinbase. By 2017, he sold around 640 bitcoins for a profit of $3.7 million and even bought a house in Utah with some of his earnings.
However, instead of reporting this income on his 2017 tax return, Ahlgren lied to his accountant by providing false information about his gains and losses. He claimed that his purchase prices were much higher than they actually were, even stating prices that exceeded the market value at the time.
The Department of Justice reported that Ahlgren's tax evasion became more daring over the years. In 2018 and 2019, he sold more bitcoins and earned over $650,000 but did not report this income. He had been researching how to use mixers to hide the source of his bitcoins since at least 2014.
Lucy Tan, an acting special agent with the IRS-Criminal Investigation, stated that Ahlgren’s attempts to hide his $1 million in cryptocurrency profits were ultimately unsuccessful. His case is significant as it is the first criminal tax evasion case focused solely on cryptocurrency in the United States.
Tan emphasized that Ahlgren will serve time because he thought his cryptocurrency transactions were untraceable. She warned that this case shows that no one can escape the law.
As interest in cryptocurrency continues to grow, especially with high prices and political support, the IRS is increasing its efforts to combat tax evasion in the crypto market. They are training employees to identify taxpayers who fail to report digital assets on their tax returns. Tan confirmed that Ahlgren's sentencing is just the beginning, and more cases are likely to follow.
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