Numbers don't lie Dont use crypto to cheat on taxes: Bitcoin bro gets 2 years Early bitcoin investor first to get prison time for crypto-related tax evasion. Ashley Belanger Dec 13, 2024 12:02 pm | 81 Credit: Cemile Bingol | DigitalVision Vectors Credit: Cemile Bingol | DigitalVision Vectors Story textSizeSmallStandardLargeWidth *StandardWideLinksStandardOrange* Subscribers only Learn moreA bitcoin investor who went to increasingly great lengths to hide $1 million in cryptocurrency gains on his tax returns was sentenced to two years in prison on Thursday.It seems that not even his most "sophisticated" tacticsincluding using mixers, managing multiple wallets, and setting up in-person meetings to swap bitcoins for cashkept the feds from tracing crypto trades that he believed were untraceable.The Austin, Texas, man, Frank Richard Ahlgren III, started buying up bitcoins in 2011. In 2015, he upped his trading, purchasing approximately 1,366 using Coinbase accounts. He waited until 2017 before cashing in, earning $3.7 million after selling about 640 at a price more than 10 times his initial costs. Celebrating his gains, he bought a house in Utah in 2017, mostly funded by bitcoins he purchased in 2015.Very quickly, Ahlgren sought to hide these earnings, the Department of Justice said in a press release. Rather than report 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 purchased in 2015 were much higher than his actual costs, even being so bold as to claim he as charged prices "greater than the highest price bitcoins sold for in the market prior to the purchase of the Utah house."First tax evasion prosecution centered solely on cryptoAhlgren's tax evasion only got bolder as the years passed after this first fraud, the DOJ said.In 2018 and 2019, he sold more bitcoins, earning more than $650,000 and deciding not to report any of it on his tax returns for those years. That meant that he needed to actively conceal the earnings, but he'd been apparently researching how mixers are used to disguise where bitcoins come from since at least 2014, the feds found, referencing a blog he wrote exhibiting his knowledge. And that's not the only step he took to try to trick the Internal Revenue Service."For these years, Ahlgren took several sophisticated steps to attempt to conceal his transactions on the bitcoin blockchain by moving his bitcoins through multiple wallets, meeting an individual in person to exchange bitcoins for cash, and using mixers, which are designed to conceal the individual who made the particular transaction," the DOJ said.Houston-based Lucy Tan, the acting special agent in charge of IRS-Criminal Investigation, said in the press release that Ahlgren's efforts to conceal a total of $1 million in cryptocurrency gains over several years were ultimately futile. His case became the first criminal tax evasion prosecution "centered solely" in the US.Ahlgren will serve time because he believed his cryptocurrency transactions were untraceable," Tan said. "This case demonstrates that no one is above the law."IRS reportedly training to find hidden crypto treasureWith bitcoin's price higher than ever as Donald Trump vows to be a "pro-crypto president," interest in the cryptocurrency is arguably at an all-time high.But around the same time that Trump began heavily campaigning to attract cryptocurrency enthusiast voters this summer, the Federal News Network reported that the IRS would be cracking down on tax evasion in the trillion-dollar cryptocurrency industry.That probe reportedly involved 400 cases, where the IRS recommended prosecution in more than half. And another effort, reportedly dubbed Operation Hidden Treasure, is currently focused on training IRS employees to "find taxpayers who leave digital assets off their tax returns."Tan confirmed that Ahlgren's sentencing "marks the first criminal tax evasion prosecution centered solely on cryptocurrency" and warned that he wouldn't be the last."As the prices for cryptocurrency are high, so is the temptation to not pay taxes on its sale," Tan said. "Avoid the temptation and avoid federal prison."Ashley BelangerSenior Policy ReporterAshley BelangerSenior Policy Reporter Ashley is a senior policy reporter for Ars Technica, dedicated to tracking social impacts of emerging policies and new technologies. She is a Chicago-based journalist with 20 years of experience. 81 Comments