An early investor in Bitcoin from Austin, Texas, identified as Frank Richard Ahlgren III, has been handed a two-year prison term for the unreported sale of over $4 million in cryptocurrency, marking a first in legal history. The United States Department of Justice (DOJ) asserts that Ahlgren “falsely underreported the capital gains” from sales of Bitcoin totaling $3.7 million between 2017 and 2019.
The DOJ pointed out that it’s a mandatory requirement for any taxpayer to report the proceeds of cryptocurrency sales along with any gains or losses on their tax return. Ahlgren had been involved with Bitcoin since 2011, buying a substantial amount of the cryptocurrency in 2015 when it was valued at less than $500.
He sold approximately 640 out of the 1,366 BTC in October 2017 at an average market price of $5,807.53. The proceedings, approximately $3.7 million, were reinvested into real estate. Inconsistencies in Ahlgren’s 2017 tax filings lead to an investigation into his unreported Bitcoin-based capital gains.
Ahlgren continued to fail in reporting his Bitcoin activity. He failed to report over $650,000 from Bitcoin sales over the years 2018 and 2019. The DOJ alleged that Ahlgren concealed the movement of funds through multiple wallet transfers, crypto mixers, and cash transactions. In sum, the tax loss from Ahlgren’s actions exceeded $1 million.
Stuart Goldberg, of the Justice Department’s Tax Division, affirmed that Ahlgren’s decision to underreport his crypto earnings and attempts to hide the movement of funds ultimately “earned him a two-year sentence”. Ahlgren’s case was labeled as the “first criminal tax evasion prosecution centered solely on cryptocurrency” by Acting Special Agent in Charge Lucy Tan of the Internal Revenue Service’s Criminal Investigation Houston Field Office.
Besides the jail term, additional penalties for Ahlgren include a year of supervised release and payment of $1.1 million in restitution to the US government.