In a landmark tax fraud case, a Texas federal court has ordered early Bitcoin investor Frank Richard Ahlgren III to surrender his cryptocurrency private keys and access codes. This directive follows Ahlgren’s December sentencing to two years in prison for underreporting capital gains on over $3.7 million in Bitcoin sales between 2017 and 2019, resulting in a tax loss exceeding $1 million.
Judge Robert Pitman issued the restraining order on January 6, mandating Ahlgren and any associates to provide all physical devices, public and private keys, seed phrases, and passphrases related to his cryptocurrency holdings. The order also requires the identification of all crypto accounts associated with Bitcoin, Bitcoin Cash, Bitcoin Gold, Ether, or Litecoin. Additionally, it prohibits any transfer or concealment of Ahlgren’s cryptocurrency assets without court approval, except for normal monthly living expenses.
Ahlgren’s fraudulent activities included inflating the cost basis of Bitcoin in his 2017 tax return to underreport capital gains and failing to report Bitcoin sales exceeding $650,000 between 2018 and 2019. He employed multiple wallets, in-person transfers, and mixers to conceal transaction details. Beyond the prison sentence, Ahlgren has been ordered to pay approximately $1.1 million in restitution to the U.S. government and will serve one year of supervised release following his incarceration.
This case marks the first criminal tax evasion prosecution centered solely on cryptocurrency, highlighting the increasing scrutiny by authorities on digital asset transactions. Lucy Tan, acting special agent in charge of IRS-Criminal Investigation’s Houston Field Office, emphasized the significance of this prosecution in enforcing tax laws within the evolving digital currency landscape.
