An Austin-based Bitcoin investor, Frank Richard Ahlgren III, has been sentenced to two years in prison for failing to report over $4 million in cryptocurrency gains, marking a significant legal precedent in crypto tax enforcement.
According to the U.S. Department of Justice (DOJ), Ahlgren underreported capital gains from selling approximately $3.7 million worth of Bitcoin between 2017 and 2019. He purchased 1,366 BTC in 2015 when Bitcoin was below $500 and sold 640 BTC in October 2017 at an average price of $5,807.53, reinvesting the proceeds into real estate.
The DOJ found that Ahlgren filed false tax returns by inflating his Bitcoin cost basis, thereby underreporting his true capital gains. Additionally, he failed to report over $650,000 in Bitcoin sales in 2018 and 2019, using crypto mixers and multiple wallet transfers to conceal his transactions.
Acting Deputy Assistant Attorney General Stuart Goldberg highlighted that Ahlgren’s actions led to a tax loss exceeding $1 million. IRS Special Agent Lucy Tan emphasized that this case is the first criminal tax evasion prosecution solely focused on cryptocurrency, underscoring the DOJ’s capability to track crypto and fiat transactions.
Alongside the prison sentence, Ahlgren must serve one year of supervised release and pay $1.1 million in restitution to the U.S. government. This case serves as a warning to crypto investors about the importance of accurately reporting cryptocurrency gains.