An individual from Austin, Texas, Frank Richard Ahlgren III, has recently been sentenced to two years in prison for his involvement in filing false tax returns related to the underreporting of capital gains from the sale of approximately $3.7 million worth of bitcoin. This announcement was made by the United States Department of Justice (DOJ) today.
As per the DOJ’s findings, Ahlgren was an early investor in Bitcoin, having started purchasing the cryptocurrency back in 2011. In 2015, he acquired 1,366 bitcoins through his Coinbase account, with the price of bitcoin peaking at around $495 per coin that year. By October 2017, the value of Bitcoin had significantly increased, leading Ahlgren to sell 640 bitcoins for $5,807 each, resulting in a total gain of $3.7 million. He then used these proceeds to purchase a home in Park City, Utah.
However, during the filing of his 2017 tax return, Ahlgren misrepresented the gains by inflating the cost basis of his bitcoin purchases, falsely claiming that he had acquired the coins at prices higher than the actual market rates. This misrepresentation substantially reduced the reported capital gains.
Between 2018 and 2019, Ahlgren sold additional bitcoins worth over $650,000 but completely omitted reporting these transactions on his tax returns. In an effort to conceal his gains, he engaged in various tactics such as transferring funds through multiple wallets, exchanging bitcoin for cash in person, and utilizing mixers to anonymize his bitcoin transactions.
Overall, the DOJ estimates that Ahlgren’s actions led to a tax loss exceeding $1 million.
Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division commented on the case, stating, “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 a large portion of his gains and sought to conceal another chunk of his profits through sophisticated techniques designed to obscure his transactions on the bitcoin blockchain. That conduct today earned him a two-year sentence.”
U.S. District Court Judge Robert Pitman has sentenced Ahlgren to two years in prison, followed by one year of supervised release. Additionally, Ahlgren has been ordered to pay $1,095,031 in restitution to the U.S. government.
Acting Special Agent in Charge Lucy Tan of IRS-Criminal Investigation (IRS-CI)’s Houston Field Office also weighed in on the case, emphasizing the consequences of tax evasion related to cryptocurrency transactions. She stated, “Ahlgren will serve time because he believed his cryptocurrency transactions were untraceable. This case demonstrates that no one is above the law. My team at IRS Criminal Investigation has the expertise and tools to track financial activity, whether it involves dollars, pesos, or cryptocurrency. This case marks the first criminal tax evasion prosecution centered solely on cryptocurrency. As the prices for cryptocurrency are high, so is the temptation to not pay taxes on its sale. Avoid the temptation and avoid federal prison.”