An Austin, Texas man, Frank Richard Ahlgren III, has been sentenced to two years in prison for tax evasion involving $3.7 million in Bitcoin sales. This landmark case marks the first criminal tax evasion prosecution in the U.S. centered solely on Bitcoin, according to the Department of Justice (DOJ).

The DOJ reported that Ahlgren, an early Bitcoin investor who began acquiring in 2011, purchased 1,366 bitcoins in 2015 through Coinbase when Bitcoin’s value peaked at $495. By October 2017, with Bitcoin trading at over $5,800, he sold 640 bitcoins for $3.7 million and used the proceeds to buy a home in Park City, Utah.

However, Ahlgren filed false federal tax returns for 2017, inflating the cost basis of his bitcoins to underreport his capital gains. Between 2018 and 2019, he sold additional bitcoins worth over $650,000 and failed to report these sales altogether.

Court records reveal that Ahlgren used advanced techniques to conceal his transactions. These included transferring Bitcoin through multiple wallets, conducting in-person cash exchanges, and using mixers designed to obscure blockchain transactions. In total, his actions caused a tax loss of more than $1 million.

“Frank Ahlgren III earned millions buying and selling bitcoins but lied to his accountant and used sophisticated techniques to hide his profits,” said Acting Deputy Assistant Attorney General Stuart M. Goldberg. “That conduct today earned him a two-year sentence.”

Acting Special Agent in Charge Lucy Tan of the IRS Criminal Investigation Houston Field Office emphasized that this case proves Bitcoin transactions are traceable. “My team has the expertise to track financial activity, whether it involves dollars, pesos, or cryptocurrency,” Tan stated.

In addition to his two-year prison sentence, U.S. District Court Judge Robert Pitman ordered Ahlgren to serve one year of supervised release and pay $1,095,031 in restitution to the U.S. government.

Bitcoin Magazine Article