A Texas resident, Frank Richard Ahlgren III, has pleaded guilty to tax fraud involving underreported cryptocurrency gains. His actions led to a significant tax loss for the Internal Revenue Service (IRS), with potential prison time now looming.

$3.7 Million in Bitcoin Sales Unreported

In 2017, Ahlgren sold 640 Bitcoin (BTC) for approximately $3.7 million. While this might seem like a major financial success, he failed to report his profits accurately on his tax return. Instead, he inflated the cost basis—the original value of the Bitcoin—which resulted in underreporting his gains and avoiding a substantial tax bill. In addition, he did not disclose $650,000 in Bitcoin sales over the following two years, adding to the tax discrepancies.

The Department of Justice (DOJ) revealed that Ahlgren’s actions caused the IRS to lose over $550,000 in taxes. The U.S. government has been increasingly cracking down on cryptocurrency-related tax fraud, reinforcing that all taxpayers must properly report gains or losses from cryptocurrency transactions.

Facing Prison Time and Financial Penalties

Ahlgren is now facing severe legal consequences. He could be sentenced to up to three years in prison, as well as fined and ordered to pay restitution. His final sentencing will be decided by a federal court judge after reviewing the U.S. Sentencing Guidelines and other legal factors.

The DOJ’s announcement serves as a warning to all cryptocurrency investors: Failing to report crypto gains accurately can result in serious consequences. The IRS expects taxpayers to treat cryptocurrency sales the same as any other form of taxable income, and failure to do so could lead to prosecution.

Ahlgren’s case is a reminder that transparency in reporting crypto earnings is crucial, as government agencies continue to monitor the space closely.