US court orders an investor to hand over the keys to crypto wallets for non-payment of taxes

The investor artificially understated the profit from the sale of assets, which brought the budget damage of $1 million

08.01.2025 - 13:05

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What’s new? A federal court in Austin, Texas, has ordered an early bitcoin investor to hand over private crypto wallet keys in a tax fraud case. Frank Richard Ahlgren III, who underreported more than $3,7 million in bitcoin profits between 2017 and 2019 to the IRS, owes the US government about $1,1 million in compensation.

Material by Cointelegraph

What else is known? Judge Robert Pitman ordered Ahlgren and all members of his family, friends, or representatives to identify and provide any physical devices used to store his cryptocurrency, as well as any public and private keys, seed phrases, or passwords.

Pitman also ordered them to identify all crypto accounts linked to bitcoin, Bitcoin Cash (BCH), Bitcoin Gold (BTG), Ethereum, or Litecoin (LTC) and prohibited them from transferring any of Ahlgren’s cryptocurrency without prior court approval.

This is defined as any action that could conceal, devalue, or diminish the value of the assets. The only exception was the use of cryptocurrencies to cover “normal monthly living expenses.” The ruling will be in full force and effect until the investor makes restitution.

Ahlgren pleaded guilty to filing a false tax return in September 2024 and was sentenced to two years in prison for tax fraud in December.

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In 2015, when bitcoin hit $465, Ahlgren bought about 1366 BTC through Coinbase, a leading US centralized crypto exchange (CEX). Two years later, he sold half of the assets at $5800 per coin for a total of $3,7 million, while significantly overstating the value of the original purchase on his tax return to show a smaller capital gain.

Then in 2018-2019, Ahlgren sold $650 000 worth of coins but did not mention it at all on his returns. Prosecutors said he used multiple wallets, personal transfers, and mixers in an attempt to hide the transaction details.

The total tax loss from all of his actions exceeded $1 million. Ahlgren’s case was the first US criminal prosecution for tax evasion related solely to cryptocurrency.

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