A federal court in Austin, Texas, has ordered an early Bitcoin investor, Frank Richard Ahlgren III, to disclose private keys and provide access to Bitcoin wallets as part of a landmark tax fraud case. The order follows Ahlgren’s December conviction for underreporting capital gains on $3.7 million in Bitcoin sales between 2017 and 2019. He was sentenced to two years in prison and ordered to pay $1.1 million in restitution.

On January 6, U.S. District Judge Robert Pitman directed Ahlgren to provide authorities with all private keys, seed phrases, and access codes for his cryptocurrency accounts, as well as any physical devices used to store them. The order extends to cryptocurrencies including Bitcoin (BTC), Bitcoin Cash (BCH), Ether (ETH), and Litecoin (LTC). Additionally, Ahlgren and his associates are prohibited from transferring or concealing crypto assets without court approval, except for “normal monthly living expenses.”

The order remains in effect until Ahlgren satisfies the court’s restitution requirements or further notice is provided.

Ahlgren, also known as “Paco,” pleaded guilty in September 2024 to filing a false tax return. He admitted to inflating the cost basis of Bitcoin sold in 2017 to reduce taxable gains and failing to report subsequent sales in 2018 and 2019. Prosecutors stated that Ahlgren used sophisticated techniques, including multiple wallets, in-person transfers, and mixing services, to obscure his transactions.

He initially purchased 1,366 Bitcoin in 2015 when it was valued at around $465 per coin. By 2017, he had sold approximately half of his holdings for $3.7 million when Bitcoin surged to over $5,800, significantly underreporting the profits on his tax returns. Subsequent unreported sales netted him over $650,000 between 2018 and 2019.

Acting Deputy Assistant Attorney General Stuart M. Goldberg described Ahlgren’s actions as deliberate and systematic: “Instead of paying the taxes he knew were due, he lied to his accountant and used blockchain technologies to obscure his activities.”

Ahlgren’s case is notable as the first U.S. criminal tax evasion prosecution focused entirely on cryptocurrency transactions. It underscores the increasing scrutiny regulators are placing on Bitcoin-related tax compliance. Lucy Tan, acting special agent in charge of IRS-Criminal Investigation’s Houston Field Office, called the case a “precedent-setting moment” for Bitcoin enforcement.

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