An early investor in Bitcoin, Frank Richard Ahlgren III, has been sentenced to two years in federal prison for filing fraudulent tax returns that “underreported” his cryptocurrency gains, according to a recent press release by the US Department of Justice (DoJ).
The case, which has drawn significant attention, highlights the risks of non-compliance with tax obligations related to cryptocurrency transactions. Ahlgren, 38, was ordered to pay over $1 million in restitution and will serve an additional year of supervised release following his prison term.
Falsified Returns And Concealed Transactions
The court found that Ahlgren, who purchased Bitcoin as early as 2011, failed to accurately report significant capital gains from cryptocurrency sales between 2017 and 2019.
The misreporting involved falsifying purchase prices and using sophisticated methods to obscure transactions on the blockchain. The total tax loss attributed to his actions exceeded $1 million.
According to the US DoJ, Ahlgren’s tax evasion scheme began in 2017 when he sold approximately 640 Bitcoin, trading at $5,807.53 per coin and generating $3.7 million in proceeds.
The agency revealed that most of these BTC were purchased in 2015 at significantly lower prices using his Coinbase account.
Instead of accurately reporting these transactions on his 2017 tax return, Ahlgren provided his accountant with false information that inflated the cost basis of the Bitcoin. This manipulation substantially reduced his reported capital gains.
The scheme extended into 2018 and 2019, during which Ahlgren sold additional Bitcoin valued at over $650,000 without reporting these transactions on his tax returns.
To further obscure his activities, Ahlgren utilized multiple wallets, conducted in-person cash exchanges, and employed mixing services designed to anonymize blockchain transactions.
The DoJ noted that his actions demonstrated “deliberate attempts” to conceal the true extent of his cryptocurrency dealings and evade his tax responsibilities.
Verdict From Authorities
The US District Court Judge Robert Pitman emphasized the severity of the offense by imposing restitution of $1,095,031 in addition to the prison term and supervised release.
Acting Deputy Assistant Attorney General Stuart M. Goldberg remarked on the deliberate nature of the misconduct, highlighting how Ahlgren sought to obscure his Bitcoin transactions while knowingly avoiding his tax obligations.
Goldberg said:
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.
Meanwhile, acting Special Agent in Charge Lucy Tan of IRS Criminal Investigation’s Houston Field Office stated:
This case demonstrates that no one is above the law. Our team has the expertise and tools to track financial activity, whether it involves dollars, pesos, or cryptocurrency.
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