American Pleads Guilty in First Major NFT Tax Evasion Case

A US citizen has admitted to evading millions in taxes after failing to report profits from a massive NFT sale, marking what appears to be the first high-profile US tax evasion case in the sector.

output: A citizen of American has admitted to evading millions in taxes after failing to report profits from a massive NFT sale, marking what appears to be the first major case of its kind in the U.S.

Waylon Wilcox pleaded guilty on Monday after federal prosecutors revealed he had earned over $13 million from selling 97 CryptoPunk NFTs throughout 2021 and 2022.

However, instead of reporting the profits to the Internal Revenue Service (IRS), Wilcox is accused of taking steps to conceal the income and ultimately avoid paying around $3.3 million in taxes. The plea comes just days ahead of the federal tax filing deadline.

According to U.S. tax law, gains from digital assets—including NFTs, cryptocurrencies, or other tokens—must be declared, and any resulting profit is subject to capital gains tax.

However, Wilcox’s actions to illegally avoid reporting his NFT earnings contravene these requirements, and saw the IRS highlight its focus on clamping down on financial misconduct.

Announcing the case, officials at the Department of Justice (DOJ) and the IRS described how their investigation had identified that Wilcox sold 97 CryptoPunks for a total price of 4,400 ETH, which was realized at an average rate of around $468,000 per Punk.

In 2023, the crypto units sold for an estimated value of $1.3 million each, showcasing the exponential gains that some early-stage NFT investors were able to achieve during the bull market.

At the time, Wilcox allegedly took steps to funnel the funds through various bank accounts and used the proceeds to make a series of smaller purchases.

These included a $2.5 million mansion in Newport Beach, California; a $740,000 boat; a $530,000 RV; and a $400,000 RV.

Despite the bulk of his NFT earnings being realized in 2021, officials said Wilcox did not report any income to the IRS for that year and filed a joint tax return with his girlfriend in 2022, falsely stating their income was $104,446.

In 2022, Wilcox allegedly sold a further six CryptoPunks for 250 ETH, which was sold at an average rate of around $3,000 per unit.

However, officials said the NFT investor did not report any of the capital gains from these sales and is estimated to have an outstanding tax liability of around $3.3 million, including penalties.

“Waylon Wilcox went to great lengths to evade taxes on his vast digital asset income and in doing so, engaged in a serious crime,” said Acting U.S. Attorney Martin Chavis.

“The role of the Department of Justice is to hold those who commit offenses against the United States fully accountable for their actions. Today’s guilty plea demonstrates that the DOJ will vigorously pursue taxpayers who engage in tax fraud, no matter the form it takes.”

Earlier this year, the IRS warned that it is increasingly focusing on tracking down taxpayers who are trying to evade taxes on their cryptocurrency gains.

The agency has also been investing heavily in new technologies to help it identify and pursue taxpayers who are engaging in tax fraud.

This case is a clear indication that the IRS is serious about collecting taxes on all types of income, including income from new and emerging sources.

As such, the agency is likely to continue to prioritize cases like this one, and we may see more high-profile tax evasion cases coming to light in the coming months and years.