A crypto investor, has been sentenced to two years in prison for not fully reporting the money he made from selling $3.7 million worth of Bitcoin. According to the DOJ, Frank Richard Ahlgren III, an early Bitcoin investor, filed false tax returns between 2017 and 2019, concealing the capital gains from these sales.
Court documents revealed that Ahlgren purchased around 1,366 Bitcoins in 2015 when they were priced at about $495 each. In 2017, he sold 640 of those Bitcoins at a much higher price—about $5,807 per Bitcoin—making $3.7 million in total.
Using this money, he acquired a house in Park City, Utah. However, when filing his 2017 taxes, Ahlgren lied to his accountant about how much he originally paid for the Bitcoins. He inflated the purchase price to make it look like he earned far less from the sales than he actually did.
In 2018 and 2019, Ahlgren sold more Bitcoins worth over $650,000 but didn’t report any of these transactions on his tax returns. To hide these sales, he used complex methods like moving his cryptocurrency through multiple digital wallets, meeting buyers in person for cash trades, and using Bitcoin “mixers”—tools designed to make transactions harder to trace. His efforts to hide his activities led to a tax loss of over $1 million.
The Department of Justice and the IRS emphasized that cryptocurrency transactions are not above the law. Acting Deputy Assistant Attorney General Stuart M. Goldberg stated that Ahlgren’s lies and attempts to hide his Bitcoin earnings earned him his prison sentence.
Lucy Tan, Acting Special Agent in Charge of IRS Criminal Investigation’s Houston Field Office, added that this case shows how tax evasion, even involving cryptocurrencies, is traceable and punishable.
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“Ahlgren will serve time because he believed his cryptocurrency transactions were untraceable,” she said. “My team at IRS Criminal Investigation has the expertise and tools to track financial activity, whether it involves dollars, pesos, or cryptocurrency.”
Cryptocurrency is treated as property by the IRS, meaning profits from its sale are subject to capital gains taxes. This applies to all transactions, whether buying, selling, or trading. Taxpayers must report gains or losses on their annual returns, no matter how complex their transactions may seem.
Cases like Ahlgren’s highlight the growing focus on crypto-related tax enforcement. As cryptocurrency adoption increases, so will most likely be the ability to track and penalize those who attempt to avoid taxes.
In addition to the prison term, U.S. District Court Judge Robert Pitman ordered Ahlgren to pay over $1 million in restitution and serve one year of supervised release after his prison term.
