On September 13, 2004, we posted Early Bitcoin Investor Pleads Guilty to Filing Tax Return that Falsely Reported His Cryptocurrency Gains, where we discussed the first public indictment of an individual who underreported the capital gains from a nearly $4 million legal sale of bitcoin and his Guilty plea on September 12, 2024.
Now according to Law360, Frank Richard Ahlgren III was sentenced to two years in federal prison On December 12, 2024. He was also ordered by a Texas federal court to pay more than $1 million in restitution to the Internal Revenue Service for the lost tax dollars.
The Prison Sentence Is Just Shy of The 27 Months Prosecutors Requested When They Argued In A Sentencing Memo That It Would Serve As A Needed Warning To Virtual Currency
Users It Said Were "Watching This Case."
Ahlgren was indicted in February and accused of making false returns for 2017 through 2019 and violating structuring laws. He was held without bail as a flight risk, and in September he pled guilty to filing a false return for 2017. In October of that year he sold 640 bitcoins for $5,800 each, reaping gains after buying the bitcoins two years earlier for less than $500 each.
Instead of reporting the true gains on his returns, he claimed he had bought the bitcoins in 2015 for much higher prices. While the highest amount any of the bitcoins traded for in 2015 was $495, Ahlgren claimed he had paid up to $9,400, prosecutors said in a sentencing memo.
Prosecutors also accused Ahlgren of selling bitcoins for $650,000 in 2018 and 2019 and failing to report the sales at all. From 2017 through 2019, he either underreported or didn't report the sale of $4 million worth of bitcoins, the DOJ said. He took sophisticated steps to hide the transactions on the bitcoin blockchain, or public ledger, including disguising his identity using mixers and meeting someone in person to exchange bitcoins for cash.
Ahlgren, who blogged about the virtual currency, knew how to hide transactions on bitcoin's blockchain and exploited the anonymity the system provides, prosecutors said.
"Ahlgren will serve time because he believed his cryptocurrency transactions were untraceable," Acting Special Agent in Charge Lucy Tan of an IRS criminal investigation unit in Texas said in a statement.
Stuart M. Goldberg, acting deputy assistant attorney general of the DOJ's Tax Division, said Ahlgren had earned his sentence when he lied to his accountant about the gains and failed to pay his taxes.
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