An early bitcoin investor was sentenced to two years in prison for evading taxes on $3.7 million in cryptocurrency gains, using mixers and secret wallets.

Bitcoin Investor Sentenced: The High Cost of Hiding Cryptocurrency Profits

Frank Richard Ahlgren III, a resident of Austin, Texas, was sentenced to two years in prison for “filing a tax return that falsely underreported the capital gains he earned from selling $3.7 million in bitcoins,” the U.S. Department of Justice (DOJ) announced on Friday.

Court records showed that Ahlgren, an early bitcoin investor, began purchasing the cryptocurrency in 2011. “In 2015, Ahlgren bought approximately 1,366 bitcoins using his accounts with Coinbase,” later reaping substantial profits from sales but evading taxes, the DOJ detailed. Acting Deputy Assistant Attorney General Stuart M. Goldberg emphasized that Ahlgren’s deliberate efforts to deceive his accountant and the IRS “earned him a two-year sentence.”

The investigation revealed that Ahlgren used deceptive methods to hide cryptocurrency sales in 2018 and 2019, the DOJ described. According to court documents:

In 2018 and 2019, Ahlgren sold bitcoins for more than $650,000, and did not report these sales at all on his 2018 and 2019 tax returns.

Prosecutors detailed how Ahlgren used mixers, multiple wallets, and in-person cash exchanges to obscure transactions. Additionally, in 2014, he publicly blogged about mixers as tools for achieving anonymity in BTC dealings. These actions, coupled with misreporting a $3.7 million bitcoin sale in 2017, resulted in over $1 million in tax losses.

Acting Special Agent in Charge Lucy Tan of IRS-Criminal Investigation noted: “This case demonstrates that no one is above the law…whether it involves dollars, pesos, or cryptocurrency.”

U.S. District Court Judge Robert Pitman imposed further penalties alongside the prison term. The DOJ explained:

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

This landmark case underscores the IRS’ expanding capabilities to trace cryptocurrency transactions. Assistant Chief Michael C. Boteler and Trial Attorney Mary Frances Richardson led the prosecution, with investigative support from IRS Criminal Investigation (IRS-CI) and the Texas Office of Attorney General.