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Austin, Texas man Frank Richard Ahlgren III has been sentenced to two years in prison for filing false tax returns that reported huge profits from selling $3.7 million worth of bitcoin, the United States Department of Justice (DOJ) announced today.
According to the DOJ, Ahlgren was the first Bitcoin investor who started buying bitcoin in 2011. In 2015, he received 1,366 bitcoins through his Coinbase account, a year when the price of bitcoin reached about $495 per coin. By October 2017, the price of Bitcoin had increased, and Ahlgren sold 640 bitcoins for $5,807 each, making a total profit of $3.7 million. He then used the money to buy a house in Park City, Utah.
However, when he filed his 2017 tax return, Ahlgren misrepresented the gains by increasing the cost basis of his bitcoin purchases, claiming that he received the coins at higher than market prices. This misreporting has significantly reduced reported earnings.
Between 2018 and 2019, Ahlgren sold additional bitcoins worth more than $650,000 but failed to report these transactions on his tax returns entirely. In an attempt to hide his gains, he transferred funds through multiple wallets, exchanged bitcoin for cash in person, and used mixers to anonymize his bitcoin transactions.
In total, the DOJ said Ahlgren’s actions resulted in more than $1 million in tax losses.
“Frank Ahlgren III made millions buying and selling bitcoins,” said Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division “But instead of paying the taxes he knew should have been paid, he lied to his accountant about the tax rate.” a large part of his profits, and he sought to hide another part of his profits by using sophisticated techniques designed to hide his transactions on the bitcoin blockchain. That behavior today earned him a two-year sentence.”
United States District Court Judge Robert Pitman sentenced Ahlgren to two years in prison, followed by one year of supervised release. Additionally, Ahlgren was ordered to pay $1,095,031 in restitution to the US government.
“Ahlgren will serve time because he believed his cryptocurrency transactions were untraceable. This case shows that no one is above the law. My team at IRS Criminal Investigation has the technology and tools to track financial activity, whether it involves dollars, pesos, or cryptocurrency ,” said Special Agent in Charge of IRS-Criminal Investigation (IRS-CI)’s Houston Field Office. “This case is the first case of tax evasion which focuses only on cryptocurrency. As the prices of cryptocurrency are high, so is the temptation to not pay taxes on its sales.
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