A bitcoin investor who went to increasing lengths to hide $1 million in cryptocurrency profits on his tax returns was sentenced to two years in prison on Thursday.
It appears that even his most “sophisticated” tactics — which included using mixers, managing multiple wallets, and setting up in-person meetings to trade bitcoins for cash — didn't stop the FBI from tracking crypto transactions he thought were were untraceable.
Austin, Texas man Frank Richard Ahlgren III started buying bitcoins in 2011. In 2015, he increased his trading and bought about 1,366 bitcoins using Coinbase accounts. He waited until 2017 to cash in, making $3.7 million after selling about 640 at a price more than ten times his initial cost. To celebrate his win, he bought a house in Utah in 2017, largely financed by bitcoins he bought in 2015.
Ahlgren soon tried to hide these incomes, the Justice Department said in a press release. Instead of reporting them on his 2017 tax return, Ahlgren lied to his accountant by submitting a false summary of his gains and losses from the sale of his bitcoins. He did this by claiming that the bitcoins he bought in 2015 were far higher than his actual cost, and even had the audacity to claim that he was charging prices that were 'higher than the highest price bitcoins were selling for on the market before the purchasing the Utah coin. house.”
The first tax evasion prosecution focused solely on crypto
Ahlgren's tax evasion only became more brazen as the years passed after this initial fraud, the DOJ said.
In 2018 and 2019, he sold more bitcoins, made more than $650,000, and decided not to report any of it on his tax returns for those years. That meant he had to actively hide the income, but he had apparently been investigating how mixers are used to disguise where bitcoins come from since 2014, the FBI found, citing a blog he wrote showcasing his knowledge. And that's not the only step he took to deceive the Internal Revenue Service.
