Austin man gets 2 years in prison for cryptocurrency tax fraud, a DOJ first

AUSTIN (KXAN) — An Austin man was sentenced Thursday morning to two years in prison for fraudulently underreporting $4 million in bitcoin sales, according to a U.S. DOJ press release.

Frank Ahlgren III, who the DOJ calls an "early adopter" of cryptocurrency, pled guilty to the charges on Sep. 12. An IRS Criminal Investigations (IRS-CI) agent said in the release that the conviction is "the first criminal tax evasion prosecution centered solely on cryptocurrency."

"Ahlgren will serve time because he believed his cryptocurrency transactions were untraceable. This case demonstrates that no one is above the law," said IRS-CI acting special agent in charge Lucy Tan in the release.

According to the DOJ, Ahlgren attempted to conceal his sales by transferring bitcoins between accounts and meeting in person to make a cash sale. He also used "mixers," tools designed to essentially launder cryptocurrency.

"Indeed, in May 2014, Ahlgren had blogged about his knowledge of mixers as ways to add anonymity to bitcoin transactions," the release said.

Following prison, Ahlgren will have a year of probation and will be made to pay $1,095,031 in restitution, according to the release.

"As the prices for cryptocurrency are high, so is the temptation to not pay taxes on its sale. Avoid the temptation and avoid federal prison," Tan said.

IRS-CI and the Texas Office of Attorney General investigated the case. The case was prosecuted in U.S. District Court's Western District of Texas.