A Texas resident, Frank Richard Ahlgren III, was sentenced to two years in prison for fraudulent tax filing.
His tax returns had misrepresented the capital gains he earned from selling 3.7 million USD worth of Bit.
Case of fraudulent reporting of crypto profits
Court records show that Ahlgren, an early Bitcoin investor, filed fraudulent tax returns during the period from 2017 to 2019. These returns had reported less or completely omitted the income from the sale of 4 million USD worth of Bit.
In the US, federal tax law requires taxpayers to report all their cryptocurrency transactions, including any gains or losses, on their annual tax returns.
"This sentence marks the first criminal tax evasion prosecution in the US that is solely focused on cryptocurrency. The case demonstrates the IRS's ability to trace and prosecute tax evasion involving cryptocurrency," according to Wadi, an influential figure, posted on the X platform (formerly Twitter).
Ahlgren's investment journey and violations
According to reports, Ahlgren started investing in Bit in 2011. By 2015, he had accumulated around 1,366 BTC through the Coinbase exchange, when the highest price of Bit that year was around 495 USD per BTC.
In October 2017, Ahlgren sold 640 Bit for 3.7 million USD, at an average price of 5,808 USD per token. He used this money to purchase a house in Utah.
However, when preparing his 2017 tax return, Ahlgren provided misleading information to deceive his accountant. He inflated the purchase price of Bit to report minimal capital gains. The figures he provided even exceeded the market price of Bit at the time.
In the following years, Ahlgren continued to sell over 650,000 USD worth of Bit but did not report these transactions in his 2018 and 2019 tax returns.
To conceal his activities, he moved the money through multiple digital wallets, conducted direct cash transactions, and used crypto mixers to obscure the transaction details on the blockchain.
Taxation on Bit sales in different countries in 2024. Source: Blockpit
Growing concerns about crypto taxation
Ahlgren's case reflects the increasing scrutiny of crypto taxation in the US. Some prominent figures like Roger Ver, known as the "Bit Jesus," are also facing serious tax-related allegations.
The US federal government has accused Ver of evading 48 million USD in taxes related to the sale of 240 million USD worth of cryptocurrency and tax obligations arising from renouncing his US citizenship in 2014. US prosecutors are seeking Ver's extradition, who is currently awaiting a decision in a Spanish court.
While the US is tightening its control over crypto taxation, other countries are relaxing their regulations. The Czech Republic recently announced plans to eliminate capital gains tax on cryptocurrency held for more than three years. Transactions under 4,200 USD per year will also be exempt from reporting.
In Russia, cryptocurrency is now classified as an asset under the new tax law. Crypto transactions are exempt from value-added tax (VAT), and income from cryptocurrency will be taxed similarly to income from securities. The individual income tax rate on crypto-related income is capped at 15%.
These developments demonstrate the varying approaches to crypto taxation worldwide, as countries balance legal oversight and fostering innovation in the blockchain economy.
