A Bitcoin Pioneer Sentenced To 2 Years In Prison

Frank Richard Ahlgren III, an early bitcoin investor, was sentenced to two years in prison for falsifying his tax returns to conceal capital gains from the sale of BTC. This case marks the first criminal prosecution for tax evasion solely focused on cryptocurrencies in the United States.

Falsification of bitcoin income

After purchasing his first bitcoins in 2011, Ahlgren continued this momentum by buying approximately 1,366 BTC through Coinbase in 2015. However, in October 2017, he sold about 640 bitcoins for a total of $3.7 million at an average price of $5,807.53 per BTC to buy a house in Park City, Utah.

However, he submitted tax returns that understated his realized gains and used sophisticated techniques to conceal his transactions. Notably: the use of multiple wallets, exchanging BTC for cash in person, and also mixers to anonymize his crypto transactions.

Even worse, Ahlgren lied to his accountant in 2017 by submitting a falsified summary of his gains and losses and claimed to have purchased the bitcoins at a much higher price than the actual price. Thus inflating the cost basis and artificially reducing his reported capital gains. Unfortunately for him, the ruse did not last long, and authorities arrested him.

A warning for all tax fraudsters

Frank Ahlgren was sentenced to 2 years in prison, plus an additional year of supervised release, and will have to pay back $1,095,031 in restitution to the United States. The U.S. Department of Justice emphasized that this case is a warning for all crypto investors. “As crypto prices are high, the temptation to not pay taxes on their sale is too. Avoid this temptation and avoid federal prison,” emphasizes Lucy Tan, special agent.

This case underscores the importance of transparency and tax compliance in the crypto realm. As bitcoin aims for $132,000, it is wise to remind investors that realized gains must be reported like any other income.