An early Bitcoin investor from Austin, Texas, has become the first person criminally charged for failing to report crypto capital gains, involving about $4 million in cryptocurrencies.
According to the U.S. Department of Justice (DOJ), Frank Richard Ahlgren III, a Bitcoin investor, “falsely underreported the (realized) capital gains” from selling Bitcoin worth $3.7 million between 2017 and 2019.
The DOJ stated: “All taxpayers are required to report any sale proceeds and gains or losses from the sale of cryptocurrency, such as Bitcoin, on a tax return.”
Ahlgren began investing in Bitcoin in 2011 and purchased 1,366 BTC on Coinbase in 2015 when Bitcoin was under $500.
In October 2017, he sold approximately 640 BTC at an average price of $5,807.53, generating $3.7 million, which he reinvested in real estate.
However, discrepancies were found in Ahlgren’s 2017 federal income tax return.
“Ahlgren then filed a false 2017 federal income tax return that substantially inflated the cost basis of the bitcoins, thereby underreporting his true capital gain from his sale of bitcoins,” the DOJ noted.
In addition, Ahlgren failed to report over $650,000 in Bitcoin sales in 2018 and 2019.
He attempted to conceal the movement of funds using wallet transfers, crypto mixers, and in-person cash transactions.
The DOJ revealed: “In total, the tax loss from Ahlgren’s criminal conduct was over $1 million.”
Acting Deputy Assistant Attorney General Stuart Goldberg commented that Ahlgren’s underreporting and concealment “earned him a two-year sentence.”
In a landmark decision, the two-year sentence marks the “first criminal tax evasion prosecution centered solely on cryptocurrency,” according to Lucy Tan, Acting Special Agent in Charge of the IRS Criminal Investigation Houston Field Office.
Tan stated, “Ahlgren will serve time because he believed his cryptocurrency transactions were untraceable.”
Ahlgren has also been ordered to serve one year of supervised release and pay $1.1 million in restitution to the U.S. government.
