Austin Man Sentenced to Two Years in Prison for Underreporting $4M in Bitcoin Gains

An Austin, Texas, man was sentenced to two years in prison for filing a tax return falsely reporting capital gains from selling around $4 million in Bitcoin (BTC).

Court records state that between 2017 and 2019, Frank Richard Ahlgren III submitted tax returns that falsely underreported or failed to disclose the sale of around 640 bitcoins at a price of $5,807.53 each, totaling roughly $3.7 million.

In 2018 and 2019, Ahlgren sold Bitcoins for more than $650,000, and again did not report these sales. By law, taxpayers must report all cryptocurrency transactions, including sales and any resulting gains or losses.

The Department of Justice (DOJ) reported that between 2017-2019, Ahlgren took several steps to conceal his Bitcoin transactions on the blockchain. These included transferring funds across multiple wallets, engaging in in-person exchanges of Bitcoin for cash, and utilizing mixers—tools designed to obscure the identity of the person behind a specific transaction.

“Frank Ahlgren III earned millions buying and selling bitcoins,” said Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division, according to a press release by the DOJ. “But instead of paying the taxes he knew were due, he lied to his accountant about the extent of a large portion of his gains, and sought to conceal another chunk of his profits through sophisticated techniques designed to obscure his transactions on the Bitcoin blockchain.”

Increased Scrutiny

The case highlights the increasing scrutiny of cryptocurrency transactions by U.S. authorities in the evolving digital asset landscape. As cryptocurrencies become more mainstream, legal actions like this serve as a reminder of the importance of accurately reporting gains.

“Although the Ahlgren case is the first criminal tax evasion case connected with cryptocurrencies, the case does not necessarily set a precedent but shows that the IRS is increasing enforcement of tax laws concerning new technologies,” John Accursio, a tax attorney with Abrams Garfinkel Margolis Bergson, LLP, told The Defiant. “I suspect that there will be more cryptocurrency-related cases, especially with the cryptocurrency reporting changes applicable to the 2025 tax year.”

Accursio explained that the IRS is implementing new cryptocurrency rules in 2025 that will increase visibility into digital asset transactions and make digital asset tax enforcement more efficient for the IRS.

“Currently, the IRS relies on taxpayers to report their digital asset gains and IRS investigations into digital asset gains can be a resource-heavy endeavor,” Accursio said. “With the new rules, digital asset gains will be reported to the IRS and the IRS will be able to assess additional tax based on the information thereon instead of relying on taxpayers' accurate reporting.”

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