On January 8th, Bloomberg reported that Frank Richard Ahlgren III, a notable early Bitcoin investor, has been ordered by a US District Court in Austin, Texas, to disclose his cryptocurrency passcodes after being sentenced to two years in custody.
Order to Disclose Passwords to $124 Million Assets
Ahlgren, who owes around $1 million in restitution related to tax evasion on cryptocurrency sales, must reveal the passcodes to unlock digital assets now valued at approximately $124 million.
This includes the Bitcoin that Ahlgren moved through a mixing service in 2020, making it more difficult for authorities to trace. The total value of the crypto tokens involved has surged in value, more than doubling over the past year.
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The court ruling was issued by Judge Robert Pitman after federal prosecutors requested that Ahlgren disclose his cryptocurrency accounts and any devices used to store his digital assets.
Ahlgren’s tax fraud case is notable as he was the first American convicted of tax crimes specifically tied to the sale of cryptocurrency assets. The case stems from Ahlgren’s underreporting of capital gains from the sale of $3.7 million worth of Bitcoin.
Authorities also revealed that some of the proceeds from these sales were used by Ahlgren to purchase a property in Park City, Utah.
The government had initially expressed concerns that Ahlgren’s assets could not be easily seized or traced using traditional methods, prompting the request to obtain his private keys.
These keys would allow officials to access and restrain the cryptocurrency holdings, preventing them from being moved or dissipated by Ahlgren or anyone else.
The judge ordered that Ahlgren could not transfer or sell any of his property without prior court approval, though he is allowed to spend money for “normal monthly living expenses.”
Rising Trend in Crypto Tax Fraud Cases
Ahlgren’s case is part of a growing trend of tax fraud cases involving cryptocurrencies, as authorities worldwide begin cracking down on tax evasion in the sector.
The US Department of Justice (DOJ) continues to focus on individuals and businesses underreporting cryptocurrency transactions. Meanwhile, South Korean authorities in Paju have decided to seize and sell the crypto assets of citizens caught evading taxes, and the Indian government has uncovered substantial GST evasion involving 17 crypto exchanges, amounting to approximately $97.1 million.
The global scrutiny of cryptocurrency-related tax fraud emphasizes the increasing need for transparent and regulated practices within the industry.
As cryptocurrency markets continue to grow, regulators are stepping up their efforts to ensure tax compliance and prevent illicit activities tied to digital assets.