According to the Department of Justice, Ahlgren underreported $3.7 million in Bitcoin (BTC) capital gains on his 2017 tax return and failed to disclose
Frank Richard Ahlgren III, an early Bitcoin investor from Texas, has been sentenced to two years in prison for tax fraud, becoming the first crypto investor to be jailed for failing to report crypto gains, according to the Department of Justice (DOJ).
Ahlgren, also known as Paco, was found to have underreported $3.7 million in Bitcoin (BTC) capital gains on his 2017 tax return and failed to disclose additional BTC sales worth $650,000 over the next two years, the DOJ stated in a press release on Friday.
“Ahlgren was an early investor in bitcoins and purchased bitcoins as early as 2011,” the DOJ noted, which places Ahlgren as a Satoshi-era investor. Satoshi era commonly refers to the period when Bitcoin’s pseudonymous creator, Satoshi Nakamoto, was active from late 2009 to 2011.
According to the DOJ, Ahlgren “used bitcoin mixers, made numerous wallet transfers, and engaged in several in-person cash exchanges to conceal the sales of his bitcoins from the IRS.” These actions caused over $1 million in tax losses, the DOJ said.
Prosecutors revealed that Ahlgren manipulated the cost basis of his BTC transactions in 2017 to lower his reported capital gains, significantly reducing his tax liability. Ahlgren misrepresented the profits he earned from selling 640 BTC, which he used to buy a house in Utah, according to prosecutors.
“Specifically, Ahlgren reported on his 2017 tax return that he sold 640 bitcoins, generating $3.7 million in capital gains,” the DOJ stated. “However, Ahlgren actually sold 1,280 bitcoins in 2017, generating $7.4 million in capital gains.”
Ahlgren pleaded guilty to one count of tax fraud in June 2023, and U.S. District Court Judge Robert Pitman also ordered him to pay $1.1 million in restitution and serve one year of supervised release following his prison term.
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