Criminal Tax Prosecutions Involving Cryptocurrency: A Comprehensive Case Analysis

Criminal tax cases involving cryptocurrency have become increasingly common as digital assets gain mainstream adoption. These prosecutions present a complex challenge for tax enforcement: they implicate serious risks to due process rights where well-intentioned innovators and first adopters may be targeted by authorities through difficult or impossible-to-comply-with tax rules, while simultaneously addressing genuine criminal conduct by those who use cryptocurrency to evade taxes.

The tension is real and consequential. On one hand, cryptocurrency technology represents genuine innovation, and early adopters often face compliance challenges due to unclear regulations, technical complexity, and the novel nature of digital assets. Tax rules developed for traditional financial instruments may be difficult or impossible to apply accurately to cryptocurrency transactions, creating situations where even taxpayers who intend to comply face criminal risk.

On the other hand, true criminals have indeed used cryptocurrency to evade taxes, taking advantage of perceived anonymity, cross-border portability, and technical complexity to conceal income and frustrate tax collection. These cases involve deliberate fraud, sophisticated concealment methods, and willful intent to evade tax obligations.

The critical question is whether enforcement distinguishes between these two categories. Sophisticated and wise application of criminal tax laws in the cryptocurrency space is essential to maintain the legitimacy of the taxation system. When enforcement targets well-intentioned taxpayers facing genuine compliance difficulties, it undermines public trust in the tax system and creates a chilling effect on innovation. When enforcement fails to address genuine criminal conduct, it undermines tax compliance and revenue collection.

The cases below illustrate this tension. Some involve clear criminal conduct with sophisticated concealment methods and willful intent. Others raise serious questions about due process, notice adequacy, and whether reasonable responses to unclear government communications can be criminalized. The distinction matters profoundly for both tax enforcement effectiveness and the protection of fundamental rights.

Note: This article focuses exclusively on cases where tax charges were brought. Many other cryptocurrency-related criminal cases involve money laundering, wire fraud, or securities violations, but prosecutors in those cases chose not to pursue tax charges. This compilation will be updated as new cases emerge.

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Case 1: United States v. Wright (2025)

Case Summary

John Caleb Wright, a 43-year-old resident of Williston, Vermont, was indicted in June 2025 for attempting to evade payment of over $1 million in federal taxes by transferring cryptocurrency assets from a centralized exchange to an unhosted (self-custodied) wallet after receiving IRS collection notices. This case represents a significant escalation in federal enforcement, focusing on "evasion of payment" rather than "evasion of assessment"—specifically, actions taken to avoid paying an already-assessed tax debt rather than concealing income to avoid initial tax assessment.

The case has drawn attention from cryptocurrency advocates who view it as a test of the right to self-custody digital assets. A defense fund has been established at selfcustodyisnotacrime.com to support Wright's legal defense, framing the case as a fundamental challenge to financial privacy and cryptocurrency user rights.

The case hinges on the adequacy of a notice of intent to levy. If wright received the notice, then the prosecution's argument that the transfer to an unhosted wallet was a willful attempt to evade tax makes sense. On the other hand, if Wright did not receive the notice, then the government is attempting to criminalize self-hosted wallets through this prosecution.

Background

The case emerged amid heightened IRS scrutiny of cryptocurrency holders failing to meet tax obligations. Wright accumulated a tax debt exceeding $1 million, primarily from unreported or underpaid income taxes related to his cryptocurrency activities. The prosecution centers on actions taken in 2021, when Wright allegedly transferred assets to evade IRS collection, rather than initial underreporting. This marks one of the few federal cases where the use of unhosted wallets plays a pivotal role in tax payment evasion charges.

Prosecution's Arguments

The prosecution alleges that Wright:

• Accrued tax debt exceeding $1 million from prior years, primarily from cryptocurrency-related income (capital gains from trading or holding, though exact sources are not fully detailed in public records)
• Received IRS notifications of intent to levy and collect in 2021, including levy notices issued to Payward Ventures, Inc., the corporate entity behind the Kraken exchange
• Transferred cryptocurrency holdings twice in 2021 from Kraken (a centralized exchange) to an unhosted, self-custodied wallet
• Moved assets beyond IRS reach by transferring from a platform where the IRS could issue subpoenas and freeze accounts (Kraken) to a wallet requiring direct access to private keys
• Demonstrated willful intent through the timing of transfers occurring shortly after IRS enforcement notices, which prosecutors describe as deliberate concealment

The U.S. Attorney's Office argues that the transfer evidenced the willfulness of the evasion, noting that such moves to "hidden" or "off-exchange" wallets demonstrate intent to defeat tax collection efforts. The prosecution argues that the transfers transformed a legitimate tool (self-custody) into one for evasion, as the assets moved from a subpoena-accessible platform to one "beyond the reach of the IRS."

Defense Arguments

Wright pleaded not guilty at his July 22, 2025 arraignment. The defense contends:

• Procedural confusion, not evasion: The defense argues that the IRS levy notice was inadequate, as it did not explicitly reference "Kraken" but rather addressed Payward Ventures, Inc., leading to confusion
• Exchange closure, not concealment: The defense frames the transfer as a response to the exchange closing Wright's account for security reasons, prompting a move to self-custody—a standard security measure, not concealment
• Due process violation: This perspective frames the case as a potential violation of due process under the Fifth Amendment, emphasizing that unclear government communications cannot justify criminalizing routine crypto practices like self-custody
• Fundamental right to self-custody: The defense emphasizes the "Not Your Keys, Not Your Coins" principle, where holding assets on exchanges exposes users to hacks, bankruptcies (e.g., FTX collapse), or arbitrary freezes

The defense warns that equating self-custody with criminal intent sets a perilous precedent that could deter users from self-custody, effectively requiring assets to remain on regulated platforms for tax compliance—undermining decentralization principles.

Unique Case Facts

1. Evasion of Payment vs. Evasion of Assessment: This case involves "evasion of payment" (26 U.S.C. § 7201) rather than "evasion of assessment"—attempting to avoid paying an already-assessed tax debt rather than concealing income to avoid initial tax assessment.

2. Unhosted Wallet as Central Issue: Unhosted wallets (also known as self-custodied or non-custodial wallets) allow users full control over private keys without third-party intermediaries. The case's significance lies in its role as a tool allegedly used to obstruct IRS asset seizure—exchanges can be compelled to freeze or transfer funds, but unhosted wallets require direct access to the user's keys, making enforcement more challenging.

3. Notice Adequacy Dispute: The IRS issued a levy notice to Payward Ventures, Inc., but the defense argues this was inadequate because it did not explicitly reference "Kraken," creating confusion. This raises questions about whether unclear government communications can justify criminalizing routine crypto practices.

4. Timing as Evidence of Intent: Prosecutors view the transfers—occurring shortly after IRS enforcement notices—as evidence of willful intent. The defense counters that the timing was coincidental, driven by exchange security measures.

5. Regulatory Tension: The case reflects broader regulatory concerns where unhosted wallets are seen by some as enablers of illicit activity but by others as essential for financial privacy and sovereignty. This prosecution could broaden the scope of what constitutes "willful" evasion under tax law, potentially including any asset relocation that complicates collection.

6. Public Support and Defense Fund: Public reaction has included fundraising for Wright's defense, with over $2,300 raised toward $50,000 for legal fees, framing it as a fight for crypto rights. The case has become a cause célèbre in cryptocurrency advocacy circles.

Timeline of Key Events

| Date | Event | |------|-------| | Pre-2021 | Wright accrues tax debt over $1 million from cryptocurrency-related income | | February-May 2021 | IRS issues levy notices; Wright transfers assets from Kraken exchange to unhosted wallet on two occasions | | June 12, 2025 | Federal grand jury indicts Wright on one count of tax evasion under 26 U.S.C. § 7201 | | July 22, 2025 | Arraignment in U.S. District Court, Burlington, before U.S. Magistrate Judge Kevin J. Doyle; Wright pleads not guilty and is released on conditions pending trial | | Ongoing (as of Dec 2025) | Pretrial motions, potential constitutional challenges; no trial date or resolution reported |

Outcome

• Indicted: June 12, 2025, by federal grand jury
• Charges: One count of willful attempt to evade tax payment under 26 U.S.C. § 7201
• Arraignment: July 22, 2025, in Burlington, Vermont
• Plea: Not guilty
• Status: Released on conditions pending trial; case ongoing as of December 2025
• Potential Penalties: Up to 5 years in federal prison, fines up to $100,000, restitution for the full tax debt plus interest and penalties, supervised release
• Court: U.S. District Court for the District of Vermont
• Defense Fund: selfcustodyisnotacrime.com

Significance

This case represents a notable escalation in federal enforcement against cryptocurrency-related tax evasion, specifically focusing on the evasion of tax payment rather than mere underreporting of income. It tests the boundaries of the IRS's ability to collect tax debts when assets are held in cryptocurrency, particularly in unhosted wallets.

The prosecution aligns with IRS trends, including Operation Hidden Treasure, which uses blockchain analytics to track evasive maneuvers. It differs from cases like United States v. Ahlgren (first pure crypto tax evasion conviction) or United States v. Ver (exit tax evasion), as it emphasizes payment evasion via asset relocation rather than false reporting.

Broader Implications:

• Self-Custody Rights: If upheld, this prosecution might deter users from self-custody, effectively requiring assets to remain on regulated platforms for tax compliance—undermining decentralization principles
• Due Process: The case raises questions about whether unclear government communications can justify criminalizing routine crypto practices
• Regulatory Precedent: The outcome could establish precedent for how "evasion of payment" applies to digital assets and whether asset relocation that complicates collection constitutes willful evasion
• Blockchain Analytics: Demonstrates the government's use of blockchain tracing and financial records to build cases against individuals leveraging digital assets to avoid obligations

Officials, including Acting U.S. Attorney Michael Drescher and IRS-CI Special Agent in Charge Harry Chavis, Jr., have stressed the case as a deterrent, affirming that cryptocurrency does not exempt users from tax laws. However, advocates warn that equating self-custody with criminal intent sets a dangerous precedent.

Due Process, Notice, and Fundamental Rights: A Critical Analysis

The Wright case raises profound questions about how tax law intersects with fundamental rights, due process protections, and the practical realities of cryptocurrency compliance. This prosecution represents a situation where tax law has created criminal risk for conduct that may be both legally protected and practically necessary, exposing serious due process, notice, and potential corruption dynamics.

Due Process and Notice Deficiencies

The Notice Problem: The defense argues that the IRS levy notice was fundamentally inadequate. The notice was addressed to "Payward Ventures, Inc." rather than explicitly referencing "Kraken," the exchange name familiar to users. This creates a due process problem: how can a taxpayer be expected to respond to a notice that doesn't clearly identify the entity holding their assets? Wright claims he was only aware of his use of Kraken.

The Fifth Amendment's Due Process Clause requires that government action provide adequate notice and opportunity to be heard. When the IRS issues a levy notice using a corporate entity name that doesn't match the consumer-facing brand, it creates confusion that undermines the notice's effectiveness. The defense contends that Wright's transfer to self-custody was a response to this confusion and the exchange's subsequent account closure, not a willful attempt to evade.

Procedural Confusion as Defense: The case highlights a critical issue in modern tax enforcement: as financial services become more complex and involve multiple corporate entities, unclear government communications can create situations where taxpayers make reasonable decisions that prosecutors later characterize as criminal. The defense argues that Wright's actions were reasonable responses to unclear notices and exchange security measures, not criminal evasion.

Corruption Dynamics and Institutional Incentives

Enforcement Incentives: The case raises questions about institutional incentives in tax enforcement. The IRS and Department of Justice face pressure to demonstrate effectiveness in cryptocurrency enforcement, particularly given public and congressional scrutiny of tax compliance in the digital asset space. This creates a dynamic where aggressive prosecutions may be pursued even when the underlying conduct is ambiguous.

Selective Enforcement Concerns: The prosecution of Wright for moving assets to self-custody, while potentially legitimate, raises questions about selective enforcement. Many cryptocurrency users routinely move assets between exchanges and self-custody wallets for security, privacy, and operational reasons. Prosecuting one individual for this conduct while others engage in similar practices without consequence suggests either arbitrary enforcement or a test case designed to establish precedent.

Deterrent vs. Punishment: Government officials have explicitly framed this case as a deterrent, suggesting that the prosecution serves broader policy goals beyond punishing Wright's specific conduct. This raises concerns about using criminal prosecution as a policy tool rather than a response to clear criminal conduct, potentially violating principles of fair notice and equal treatment.

Fundamental Rights to Technology and Business

Right to Self-Custody: The case implicates fundamental questions about the right to engage freely with technology. Self-custody of cryptocurrency assets is not merely a convenience—it represents a core principle of the technology: "Not Your Keys, Not Your Coins." This principle exists precisely because centralized exchanges have proven vulnerable to hacks, bankruptcies (FTX), and arbitrary freezes.

If moving assets to self-custody can constitute criminal tax evasion, the government effectively requires taxpayers to maintain assets on platforms subject to government control. This creates a de facto requirement that undermines the decentralized nature of cryptocurrency and forces users to accept counterparty risk they may reasonably seek to avoid.

Business Autonomy: The prosecution also implicates rights to engage in business freely. Cryptocurrency traders and investors may have legitimate business reasons to move assets between platforms, including:

• Security concerns about exchange vulnerabilities
• Operational needs for different platforms' features
• Privacy considerations
• Response to exchange policy changes or account restrictions

Criminalizing asset movement that complicates tax collection, even when done for legitimate reasons, creates a chilling effect on normal business operations.

The Compliance Difficulty Problem

Intent vs. Capability: The case highlights a critical tension in cryptocurrency tax compliance: even taxpayers who intend to comply may face practical difficulties. The defense argues that Wright's situation demonstrates how tax compliance can become difficult even when the taxpayer intends to comply:

1. Unclear Notices: Government communications that don't clearly identify affected entities create confusion
2. Exchange Responses: Third-party exchanges may close accounts or restrict access in response to government notices, forcing asset transfers
3. Technical Complexity: The relationship between corporate entities (Payward Ventures) and consumer-facing brands (Kraken) creates confusion about who holds assets
4. Timing Issues: The sequence of events—notice, exchange response, asset transfer—may create the appearance of evasion even when driven by external factors

Reasonable Responses to Unclear Situations: When government notices are unclear and exchanges respond by closing accounts, taxpayers face a dilemma: maintain assets on a platform that has restricted access, or move to self-custody? The defense argues that choosing self-custody in this situation is a reasonable response to unclear circumstances, not criminal evasion.

The Precedent Risk

Expanding Criminal Liability: If the prosecution succeeds, it could establish precedent that any asset movement that complicates tax collection, regardless of the taxpayer's intent or the reasonableness of their actions, constitutes criminal tax evasion. This would dramatically expand criminal liability in the tax context, potentially criminalizing routine business decisions.

Chilling Effect on Innovation: The prosecution creates a chilling effect on cryptocurrency adoption and innovation. If self-custody can be criminalized in the context of tax collection, users may be deterred from engaging with cryptocurrency technology at all, or forced to maintain assets on centralized platforms that are vulnerable to government control, hacks, and failures.

Due Process Erosion: The case represents a potential erosion of due process protections in tax enforcement. If unclear government communications can justify criminal prosecution, taxpayers face criminal risk even when they act reasonably in response to ambiguous situations. This undermines the principle that criminal liability requires clear notice of prohibited conduct.

Conclusion: A Case Study in Overreach?

The Wright case may represent a situation where tax enforcement has overreached, creating criminal risk for conduct that is both legally protected (self-custody as a fundamental right) and practically necessary (responding to unclear notices and exchange restrictions). The prosecution tests whether the government can criminalize reasonable responses to its own unclear communications, potentially setting a dangerous precedent for tax enforcement in the digital age.

The case raises fundamental questions about:

• Whether unclear government notices can justify criminal prosecution
• Whether self-custody of assets can be criminalized as tax evasion
• Whether institutional incentives for aggressive enforcement may override due process protections
• Whether tax compliance difficulties, even when unintended, can create criminal liability

The outcome will establish important precedent for how tax law applies to fundamental rights of technology use and business autonomy in an increasingly digital economy.

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Case 2: United States v. Ahlgren (2024)

Case Summary

Frank Richard Ahlgren III, an early Bitcoin investor, pleaded guilty to filing false tax returns that underreported capital gains from cryptocurrency sales. This case is significant as the first criminal tax evasion prosecution centered solely on cryptocurrency transactions.

Prosecution's Arguments

The prosecution alleged that Ahlgren:

• Purchased approximately 1,366 bitcoins in 2015 at relatively low prices during Bitcoin's early adoption phase
• Sold approximately 640 bitcoins in 2017 for about $3.7 million, realizing substantial capital gains
• Reported only $250,000 in capital gains on his 2017 return, omitting the full amount of approximately $3.7 million in gains
• Used sophisticated methods to obscure transactions, including:
  • Chain-hopping: Moving funds across different blockchains to break transaction trails
  • Peer-to-peer trades: Conducting transactions directly with other parties to avoid exchanges
  • Mixers: Using cryptocurrency mixing services to obscure the origin and destination of funds
  • "Smurfing": Splitting transactions into smaller amounts to avoid detection thresholds
• Used proceeds to purchase a $3.7 million residence in Austin, Texas, demonstrating awareness of the substantial funds
• Engaged in structuring by making cash deposits in amounts designed to avoid currency transaction reporting requirements (under $10,000)

The government emphasized that Ahlgren was aware of his tax obligations, pointing to his use of the proceeds for significant personal purchases and his deliberate structuring of cash transactions to avoid reporting. The IRS used blockchain analysis to trace funds and calculate unreported gains, demonstrating the agency's ability to penetrate anonymity tools.

Defense Arguments

Ahlgren pleaded guilty to two counts of filing false tax returns (26 U.S.C. § 7206(1)), acknowledging:

• The deliberate nature of the underreporting
• His awareness that cryptocurrency transactions were subject to tax reporting requirements
• His cooperation with authorities following the investigation

The defense did not contest the charges but may have argued for leniency based on:

• Early cooperation with the investigation
• Acceptance of responsibility through the guilty plea
• The novel nature of cryptocurrency tax reporting at the time

Unique Case Facts

1. First-of-its-Kind Prosecution: This case was described by the Department of Justice as the "first criminal tax evasion prosecution centered solely on cryptocurrency," establishing an important precedent.

2. Timing Significance: Ahlgren's Bitcoin purchases in 2015 and sales in 2017 occurred during a period of dramatic price appreciation, with Bitcoin rising from approximately $200-300 in 2015 to over $1,000 by early 2017.

3. Structuring Charges: In addition to tax evasion, Ahlgren was charged with structuring cash deposits to avoid currency transaction reporting, demonstrating sophisticated efforts to conceal the source of funds.

4. Substantial Restitution: Ahlgren was ordered to pay $1,095,031 in restitution, representing the tax loss to the government.

Outcome

• Pleaded Guilty: Two counts of filing false tax returns (26 U.S.C. § 7206(1))
• Sentenced: December 12, 2024
• Sentence: 24 months (2 years) in federal prison, 1 year supervised release
• Restitution: $1,095,031 (no fine imposed beyond restitution)
• Court: U.S. District Court for the Western District of Texas

Significance

This case established that the IRS and Department of Justice will pursue criminal tax charges for cryptocurrency-related tax evasion, even when the underlying transactions themselves were legal. It demonstrated that ignorance of tax obligations is not a defense, particularly for sophisticated investors who realize substantial gains. The case highlights the IRS's ability to penetrate anonymity tools through blockchain analysis, sending a strong message that technical methods of concealment do not provide immunity from tax enforcement.

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Case 3: United States v. Bise and Mendez (2022)

Case Summary

Bruce Bise (60) and Samuel Mendez (65), Dallas-based founders of the cryptocurrency company Bitqyck, pleaded guilty to tax evasion after raising approximately $24 million from over 13,000 investors through an initial coin offering (ICO). The case highlights tax obligations for cryptocurrency fundraising and the misuse of investor funds, and was tied to broader SEC fraud allegations.

Prosecution's Arguments

The prosecution alleged that Bise and Mendez:

• Raised $24 million from over 13,000 investors through Bitqyck's ICO, making fraudulent promises about mining operations and token value
• Misrepresented ownership of a mining facility and the nature of token offerings (Bitqy and BitqyM tokens)
• Failed to file corporate tax returns for Bitqyck and underreported personal income
• Used company funds for personal expenses, including luxury items, casino trips, and gambling
• Caused IRS losses exceeding $1 million through their failure to report income and pay taxes
• Engaged in broader securities fraud, with the case tied to a separate SEC fraud settlement of $10.1 million

The government emphasized that the defendants treated investor funds as personal income while failing to meet their tax obligations, resulting in significant tax loss to the U.S. Treasury. The case involved both tax evasion and securities fraud elements.

Defense Arguments

Both defendants pleaded guilty to tax evasion charges, acknowledging:

• Their failure to report income from the ICO
• The misuse of company funds for personal expenses
• Their tax obligations related to the cryptocurrency fundraising

The defense likely argued for reduced sentences based on:

• Acceptance of responsibility through guilty pleas
• Willingness to make restitution
• The novel and uncertain regulatory environment surrounding ICOs at the time

Unique Case Facts

1. ICO-Specific Tax Issues: This case was among the first to address tax obligations specifically related to funds raised through initial coin offerings, establishing that ICO proceeds are taxable income to the founders.

2. Scale of Investor Impact: With over 13,000 investors, the case demonstrated the potential for widespread harm when cryptocurrency companies fail to comply with tax obligations.

3. Dual Misconduct: The case involved both tax evasion and securities fraud elements, though prosecutors focused on the tax charges. The misuse of investor funds for personal expenses while evading taxes created a particularly egregious pattern of conduct.

4. Sentencing: Both defendants received identical 50-month sentences, reflecting the government's view that they were equally culpable in the scheme.

Outcome

• Charged: August 2021
• Pleaded Guilty: Bise in September 2021, Mendez in October 2021
• Sentenced: March 2022
• Sentence: Combined 8 years (Bise 3 years, Mendez 5 years) in federal prison, plus restitution
• Court: U.S. District Court for the Northern District of Texas

Significance

This case established that funds raised through ICOs are taxable income to the recipients, regardless of how the tokens are structured or marketed. It also demonstrated that the IRS will pursue criminal charges when ICO founders fail to report substantial income, even in the context of broader securities violations. This was an early example of ICO-linked tax evasion, occurring during the peak of the ICO boom period (2017-2018) when many projects raised funds without proper tax planning or compliance.

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Case 4: United States v. Trainor (2022)

Case Summary

Ethan Thomas Trainor of South Florida pleaded guilty to attempted tax evasion after failing to report over $1 million in cryptocurrency earnings from illegal dark web transactions. The case highlights the intersection of cybercrime and tax evasion, demonstrating that income from illegal activities is still subject to tax reporting requirements.

Prosecution's Arguments

The prosecution alleged that Trainor:

• Used cryptocurrency to buy and sell hacked online account logins on dark web marketplaces, facilitating identity theft and account takeovers
• Earned over $1 million in cryptocurrency through these illegal transactions between approximately 2017 and 2021
• Used sophisticated online techniques to conceal his earnings from the IRS, including:
  • Use of cryptocurrency mixing services
  • Transactions through multiple wallets and exchanges
  • Attempts to obscure the source and destination of funds
• Failed to report any of this income on his tax returns, despite earning substantial amounts
• Deliberately concealed the income through technical means designed to prevent tracing

The government emphasized that even income derived from illegal activities must be reported for tax purposes, and that Trainor's sophisticated concealment efforts demonstrated willful intent to evade taxes.

Defense Arguments

Trainor pleaded guilty to attempted tax evasion, acknowledging:

• His failure to report cryptocurrency income from dark web transactions
• The use of techniques to conceal the income from authorities
• His awareness of tax reporting obligations

The defense likely argued for leniency based on:

• Early cooperation following arrest
• Acceptance of responsibility through guilty plea
• The complexity of tracking cryptocurrency transactions

Unique Case Facts

1. Illegal Source Income: This case established that income from illegal activities (selling hacked account credentials) is still subject to tax reporting requirements, following the principle established in cases like United States v. Sullivan (1927).

2. Dark Web Connection: The case demonstrated the IRS's ability to trace cryptocurrency transactions even when they originate from dark web marketplaces and involve sophisticated concealment techniques.

3. Technical Sophistication: Trainor's use of mixing services and multiple wallet transfers demonstrated the technical knowledge required to attempt concealment, which the prosecution used to establish willful intent.

4. Cybercrime-Tax Nexus: The case highlighted how cryptocurrency facilitates both the underlying illegal activity (selling hacked credentials) and the tax evasion (concealing the proceeds).

Outcome

• Pleaded Guilty: October 3, 2022, to attempted tax evasion (26 U.S.C. § 7201)
• Sentence: Included prison time (up to 5 years possible) and restitution (specific details not publicly disclosed)
• Court: U.S. District Court for the Southern District of Florida

Significance

This case reinforced the long-standing principle that income from illegal activities is taxable, while also demonstrating the IRS's increasing capability to trace cryptocurrency transactions even when sophisticated concealment methods are employed. It serves as a warning that technical sophistication does not provide immunity from tax enforcement. The case demonstrates early use of digital concealment techniques in tax evasion cases, showing that the IRS was developing capabilities to trace cryptocurrency even when defendants used anonymous wallets and exchanges to obscure transactions.

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Case 5: United States v. Ver (2024)

Case Summary

Roger Ver, an early Bitcoin advocate known as "Bitcoin Jesus" for his prominent role in promoting cryptocurrency adoption, was indicted in February 2024 (unsealed April 2024) and arrested in Spain in May 2024 on charges of mail fraud, tax evasion, and filing false tax returns related to the sale of approximately $240 million worth of Bitcoin. The case involves complex jurisdictional issues due to Ver's renunciation of U.S. citizenship in 2014 and subsequent exit tax obligations. In October 2025, Ver entered a deferred prosecution agreement, resolving all charges without prison time.

Prosecution's Arguments

The prosecution alleged that Ver:

• Acquired Bitcoin starting in 2011, including through companies MemoryDealers and Agilestar
• By 2014, held approximately 131,000 BTC (valued at approximately $871 each at that time) through personal ownership and corporate entities
• Renounced U.S. citizenship in 2014 (obtaining St. Kitts and Nevis passport), which triggered an "exit tax" under Section 877A on worldwide assets
• Provided false information to appraisers and tax preparers regarding his Bitcoin holdings, including:
  • Undervaluing his cryptocurrency holdings
  • Omitting personal ownership of Bitcoin
  • Misrepresenting the structure of his holdings
• Sold tens of thousands of BTC for approximately $240 million in cash without reporting the gains
• Used corporate structures and misleading disclosures to conceal the true extent of his holdings and sales

The government alleged a tax loss of at least $48 million. The case involved eight counts total: mail fraud (18 U.S.C. § 1341), tax evasion (26 U.S.C. § 7201), and filing false tax returns (26 U.S.C. § 7206(1)).

Defense Arguments

Ver entered a deferred prosecution agreement in October 2025, resolving all charges without admitting guilt in a traditional sense, but agreeing to:

• Pay up to $49.9 million in restitution
• Comply with all terms of the agreement
• Avoid any future violations

The deferred prosecution agreement suggests that:

• Ver and his defense team negotiated a resolution that avoided the risks of trial and potential extradition
• The government was willing to resolve the case without requiring a guilty plea or prison time, likely in exchange for substantial restitution and cooperation
• Both sides avoided the complexity and uncertainty of litigating exit tax issues, citizenship renunciation, and international extradition

The resolution through deferred prosecution rather than trial means specific defense arguments were not publicly litigated, but the agreement itself suggests the defense may have raised substantial legal questions about jurisdiction, exit tax calculations, and the application of tax laws to expatriates with cryptocurrency holdings.

Unique Case Facts

1. High-Profile Defendant: Ver is one of the most prominent early Bitcoin advocates, having invested heavily in Bitcoin startups and promoted cryptocurrency adoption globally. His prosecution sends a strong message about tax enforcement priorities.

2. Citizenship Renunciation: Ver renounced his U.S. citizenship in 2014, a move that can trigger "expatriation tax" under Section 877A, but the timing relative to the 2017 Bitcoin sales creates complex jurisdictional questions.

3. Scale of Alleged Evasion: At $240 million in Bitcoin sales, this represents one of the largest alleged tax evasions in cryptocurrency history, potentially involving tens of millions in unpaid taxes.

4. Corporate Structure Complexity: The case involves U.S. companies controlled by a non-U.S. citizen, raising questions about how corporate income is attributed and taxed.

5. International Extradition: Ver's arrest in Spain and potential extradition adds an international dimension, testing cooperation between U.S. and foreign authorities in cryptocurrency tax cases.

6. Public Statements as Evidence: Ver's public statements about taxation, including libertarian views expressed in videos and interviews, may be used by prosecutors to establish willful intent to evade taxes.

Outcome

• Indicted: February 15, 2024 (unsealed April 2024)
• Arrested: May 2024 in Spain
• Charges: Eight counts total - mail fraud (18 U.S.C. § 1341), tax evasion (26 U.S.C. § 7201), and filing false tax returns (26 U.S.C. § 7206(1))
• Resolution: Deferred prosecution agreement entered October 2025
• Restitution: Up to $49.9 million
• Prison Time: None (deferred prosecution agreement)
• Court: U.S. District Court for the Central District of California

Significance

This case represents the highest-profile cryptocurrency tax evasion prosecution to date, involving a well-known figure in the cryptocurrency community. The resolution through deferred prosecution agreement, rather than trial, suggests both sides recognized the complexity of litigating exit tax issues, citizenship renunciation, and international jurisdiction. The substantial restitution amount ($49.9 million) reflects the government's view of the seriousness of the alleged tax loss ($48 million), while the avoidance of prison time may reflect the complexity of the legal issues and Ver's willingness to resolve the matter. The case underscores exit tax risks for cryptocurrency holders who renounce U.S. citizenship, particularly those with substantial holdings that may be difficult to value accurately.

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Case 6: United States v. Wilcox (2025)

Case Summary

Waylon Wilcox, a 45-year-old from Dillsburg, Pennsylvania, pleaded guilty to underreporting nearly $13 million in profits from trading CryptoPunk NFTs. This case represents one of the first criminal tax prosecutions specifically involving NFT transactions, highlighting the IRS's expanding focus on various forms of digital assets beyond traditional cryptocurrencies.

Prosecution's Arguments

The prosecution alleged that Wilcox:

• Bought and sold 97 CryptoPunk NFTs between 2021 and 2022, generating over $13 million in unreported income
• Claimed zero cryptocurrency-related income on his 2021 and 2022 tax returns, despite the substantial NFT trading activity
• Evaded approximately $3.3 million in taxes through the underreporting
• Demonstrated willful intent through the complete omission of all cryptocurrency-related income across multiple tax years

The government emphasized that NFT transactions are subject to the same tax rules as other property transactions, and that the substantial profits required accurate reporting regardless of the novel nature of the asset class. The case involved digital artwork sales on blockchain platforms, with no specific obfuscation methods noted, suggesting the underreporting was through simple omission rather than sophisticated concealment.

Defense Arguments

Wilcox pleaded guilty to two counts of filing false individual income tax returns, acknowledging:

• His failure to accurately report NFT trading profits
• The willful nature of the underreporting
• His acceptance of responsibility

The defense likely argued for leniency based on:

• Early cooperation and guilty plea
• The relatively novel nature of NFT taxation
• Acceptance of responsibility and willingness to pay restitution

Unique Case Facts

1. First Major NFT Tax Case: This case is among the first criminal tax prosecutions specifically involving NFT transactions, establishing that NFTs are treated as property for tax purposes, similar to other cryptocurrencies.

2. CryptoPunk Specificity: CryptoPunks are among the earliest and most valuable NFT collections, with individual NFTs selling for millions of dollars. Wilcox's trading activity involved high-value transactions that would have been difficult to overlook.

3. Multi-Year Pattern: The underreporting occurred across two tax years (2021 and 2022), demonstrating a pattern of conduct rather than isolated errors.

4. Substantial Scale: At nearly $13 million in underreported profits, this represents one of the largest NFT-related tax evasions prosecuted to date.

5. Timing Significance: The transactions occurred during the peak of the NFT market in 2021-2022, when NFT trading volumes and values reached historic highs, making accurate reporting particularly important.

Outcome

• Pleaded Guilty: April 11, 2025, to two counts of filing false income tax returns (26 U.S.C. § 7206(1))
• Potential Sentence: Up to 6 years in prison (3 years per count) and millions in fines/restitution
• Status: Sentencing pending as of December 2025
• Court: U.S. District Court for the Middle District of Pennsylvania

Significance

This case establishes that NFT transactions are subject to the same tax reporting requirements as other cryptocurrency and property transactions. It demonstrates the IRS's expanding enforcement focus beyond Bitcoin and Ethereum to include newer forms of digital assets. The prosecution of NFT tax evasion sends a clear message that the novelty of an asset class does not excuse tax reporting obligations. The case highlights IRS focus on NFT markets, which saw explosive growth in 2021-2022.

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Key Takeaways and Trends

Enforcement Patterns

1. Increasing Frequency: Criminal tax prosecutions involving cryptocurrency have accelerated since 2022, with cases involving various types of digital assets (Bitcoin, ICO tokens, NFTs).

2. Diverse Fact Patterns: Cases involve early investors, ICO founders, dark web operators, high-profile figures, and NFT traders, demonstrating that tax enforcement applies across all segments of the cryptocurrency ecosystem.

3. Substantial Amounts: Cases involve significant sums, from hundreds of thousands to hundreds of millions of dollars, reflecting both the scale of cryptocurrency gains and the IRS's focus on high-impact cases.

4. Technical Sophistication: Many cases involve defendants who used sophisticated methods to conceal transactions (mixing services, multiple wallets, unhosted wallets), yet still faced prosecution.

Legal Principles Established

1. Property Treatment: All cases confirm that cryptocurrency and NFTs are treated as property for tax purposes, subject to capital gains rules.

2. Illegal Income Still Taxable: The Trainor case reinforced that income from illegal activities must still be reported and taxed.

3. ICO Proceeds Are Income: The Bise and Mendez case established that funds raised through ICOs are taxable income to recipients.

4. Collection Challenges: The Wright case highlights unique challenges in collecting tax debts when assets are held in unhosted cryptocurrency wallets.

Defense Strategies Observed

Most defendants in these cases have pleaded guilty, limiting public disclosure of defense arguments. However, common themes include:

• Cooperation with authorities
• Acceptance of responsibility
• Arguments about the novel or uncertain nature of cryptocurrency tax rules
• Challenges to jurisdiction (particularly in international cases like Ver)

Future Implications

As cryptocurrency adoption continues and new asset classes emerge (DeFi tokens, stablecoins, etc.), we can expect:

• More prosecutions as IRS enforcement capabilities improve
• Cases involving newer asset types and transaction methods
• Increased focus on international tax evasion using cryptocurrency
• Testing of collection mechanisms for cryptocurrency tax debts
• Clarification of tax rules for complex transactions (staking, DeFi, etc.)

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Conclusion

These criminal tax prosecutions represent the leading edge of tax enforcement in the cryptocurrency space. They establish that:

• Tax obligations apply regardless of asset type - Bitcoin, NFTs, ICO tokens, and other digital assets are all subject to tax reporting
• Technical sophistication does not provide immunity - Use of mixing services, multiple wallets, and other concealment methods does not prevent prosecution
• Scale matters - The IRS is focusing on substantial cases that send strong deterrent messages
• Enforcement is accelerating - The frequency and diversity of cases is increasing

Taxpayers involved in cryptocurrency transactions should ensure accurate reporting of all transactions, regardless of the asset type or transaction method. The cases above demonstrate that ignorance of tax obligations, technical attempts at concealment, or arguments about the novelty of digital assets are not effective defenses against criminal tax charges.

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Last Updated: January 2025

Note: This article will be updated as new criminal tax cases involving cryptocurrency are prosecuted. If you are aware of additional cases that should be included, please contact the editors.

Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Individuals facing tax issues should consult with qualified tax professionals.