A trader dealing in non-fungible tokens (NFTs) runs the risk of a six-year prison sentence after pleading guilty to charges of underreporting earnings by almost $13 million gathered through selling CryptoPunk NFTs. This announcement came from the US Attorney’s Office for the Middle District of Pennsylvania.
Residing at the age of 45, Waylon Wilcox admitted to presenting false income tax returns for the years 2021 and 2022. A former investor in CryptoPunk, Wilcox submitted a guilty plea on April 9 towards two counts of handing in false income tax returns, which was publicly addressed on April 11 by federal prosecutors.
In April 2022, Wilcox had filed a false income tax return for the preceding year, leading to an underreporting of income tax by an estimated $8.5 million, which trimmed his owed tax value by approximately $2.1 million. He repeated this in October 2023, delivering another misleading income tax return for the fiscal year. This falsely reported his 2022 income, reducing it by an estimated $4.6 million, which helped lower his tax obligation by close to $1.1 million.
The federal law’s maximum penalty for such offenses is up to six years in prison along with supervised release and fines, however, the exact sentencing has yet to be detailed.
The trader had been busy buying and selling 97 CryptoPunk NFTs from the largest NFT collection in the industry, boasting a market cap of $687 million. Wilcox sold off 62 of these NFTs in 2021, earning about $7.4 million but reported much less on his tax returns. He followed this up with selling another 35 CryptoPunks in 2022 for $4.9 million. The Department of Justice claims that in both these years, Wilcox falsely selected “no” when questioned if he had been involved with digital asset transactions.
The IRS Criminal Investigation is committed to revealing any complex financial strategies involving virtual currency or NFT transactions aimed at concealing taxable income. It is crucial in today’s economic climate that all people have confidence in the knowledge that everybody is abiding by the rules and paying their due taxes.
Global interest in crypto tax regulations increased in June 2024 when the IRS implemented new cryptocurrency regulation, mandating all U.S. cryptocurrency transactions to be subject to tax reporting for the first time by third parties.
Since the start of the year, centralized crypto exchanges (CEXs) along with other brokers have become obliged to report all sales and exchanges of digital assets. U.S. President Donald Trump then signed a joint congressional resolution on April 10 aimed to reverse previous legislation put forth by the Biden government that would have compelled decentralized finance protocols (DeFi) to report transactions to the IRS.
Scheduled to start in 2027, the proposed IRS DeFi broker rule would increase existing tax reporting requirements to include transactions on DeFi platforms, requiring them to reveal gross proceeds of cryptocurrency sales.