‍Texas Man Charged for Filing Tax Returns that Falsely Reported His Cryptocurrency Gains

On February 7, the US Department of Justice announced that a federal grand jury indicted a Texas man, in a first of its kind case, for filing false tax returns and structuring cash deposits to avoid currency transaction reporting requirements.

Unlike prior cryptocurrency criminal tax cases, which had some element of money laundering, fraud or other illicit activity, this indictment was the first that only included tax evasion related activity.

According to the indictment, between 2017 and 2019, Frank Richard Ahlgren III, of Austin, filed false tax returns that underreported or did not report the sale of $4 million worth of bitcoin in which he had substantial gains. 

All taxpayers are required to report any sale proceeds and gains or losses from the sale of cryptocurrency, such as bitcoin, on a tax return.  

According to the court documents, on October 23, 2017, Ahlgren sold approximately 640 bitcoins worth approximately $3.7 million. He used those proceeds to purchase a house in Park City, Utah. But when Ahlgren filed his 2017 tax return, he fraudulently reported a capital gain of just $21,167.

In 2018, Ahlgren sold approximately 38 bitcoins worth roughly $398,000 to purchase gold coins and made additional sales in 2019. Again, prosecutors say he failed to report those sales which totaled more than $650,000 on his tax returns.

The indictment further alleges that, in order to avoid detection, in 2019 and 2020, Ahlgren made numerous cash deposits in individual amounts of $10,000 or less to avoid bank reporting requirements. Making cash deposits of less than $10,000 is not illegal—it only violates the law when the transactions are structured to evade those reporting requirements.

IRS Criminal Investigation and the Texas Office of Attorney General are investigating the case.

According to the Department of Justice, Assistant Chief Michael C. Boteler and Trial Attorney Mary Frances Richardson of the Justice Department’s Tax Division and Assistant U.S. Attorney William R. Harris for the Western District of Texas are prosecuting the case.