The Dream of Getting Rich with Meme Coins: The Tax Pitfall in a $140 Billion Market
In 2024, Bitcoin has reached the center stage of global finance, and meme coins have also joined the frenzy. This year, meme coins have sprung up like mushrooms after rain, with trading volume surging by 950%, and market capitalization exceeding $140 billion. This excitement has attracted many ordinary investors into the realm of crypto assets.
Seeing this scene, doesn't it remind you of the ICO boom in 2017? Back then, with the emergence of the ERC-20 standard, the cost of issuing tokens dropped significantly, and there were countless projects, with money flowing in abundantly. Now, platforms like Pump.fun have made issuing tokens even simpler and fairer, and the meme coin storm has begun. But let’s not forget the tax issues that arose during the ICO era; now meme coins must face similar challenges.
Let's take a look at two typical ICO tax evasion cases to wake everyone up.
The Oyster Case: Founder Minted Coins Privately and Was Sentenced to Four Years
Oyster Protocol, the one involved in decentralized data storage, had an ICO in 2017 and issued a PRL token. They claimed to build a win-win ecosystem, but the founder Bruno Block secretly minted coins and sold them, causing the PRL price to plummet, while he profited immensely.
Later, the SEC sued him for fraud, and the IRS and FBI came to investigate taxes. Bruno Block only reported a small income, failing to mention millions in expenses, and was ultimately convicted of tax evasion, serving four years in prison and fined $5.5 million.
The Bitqyck Case: False Promises, Two Founders Sentenced to Eight Years
Bitqyck claimed to provide a new way to get rich with Bitcoin, raising $24 million in their ICO. However, they did not distribute shares to investors, and the mining facilities were fake. The money was spent by founders Bise and Mendez for their own use. The SEC sued them for fraud, and the tax authorities investigated their tax evasion. The two underreported millions in income and were each sentenced to 50 months in prison, along with a joint fine of $1.6 million.
In both cases, tax evasion was a major issue. In the United States, tax evasion is a serious crime; deliberately failing to report income or falsely reporting expenses can lead to prison and fines. With new entities like ICOs and meme coins, tax compliance is crucial.
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