Frank Richard Ahlgren III, an early adopter of Bitcoin (BTC), has been directed by a Texas court to relinquish access to his crypto wallets, BNN Bloomberg reported on Jan. 7.
According to the report, Ahlgren was ordered to provide the private keys, seed phrases, and any devices used to store his digital assets. This comes as part of legal proceedings tied to tax evasion charges.
Judge Robert Pitman also restricted Ahlgren’s close associates from transferring or reducing the value of his crypto holdings without court approval. Only essential monthly living expenses are exempted from this restriction.
The crime
Ahlgren entered the Bitcoin space in 2011 but gained regulatory attention for activities starting in 2015. That year, he purchased approximately 1,366 BTC through Coinbase when Bitcoin’s peak price was around $495.
By 2017, he sold 640 BTC for $3.7 million, using most of the proceeds to buy a property in Park City, Utah. However, he falsified his tax returns by claiming exaggerated purchase prices far above market value.
In 2018 and 2019, Ahlgren sold additional Bitcoin worth over $650,000 but failed to disclose these transactions to the IRS.
Furthermore, he employed techniques like transferring funds through multiple wallets, using cash exchanges, and leveraging Bitcoin mixers to obfuscate his transactions.
In September 2024, Ahlgren pleaded guilty to the charges and received a two-year prison sentence. Following his release, he will also face a one-year period of supervised monitoring and pay restitution of $1 million.
Legal implications
The case highlights significant legal risks for crypto investors. Bill Hughes, an attorney with blockchain firm Consensys, remarked that while self-custody empowers users, governments retain the authority to seize digital assets for tax violations.
He stressed the importance of adhering to tax laws, warning that failure could lead to severe consequences, including asset forfeiture and imprisonment.
Acting Special Agent Lucy Tan of the IRS Criminal Investigation echoed this sentiment. She noted that the allure of crypto’s high value often tempts individuals to evade taxes. However, the penalties are clear, as non-compliance can result in federal prison.
She added:
“Ahlgren will serve time because he believed his cryptocurrency transactions were untraceable. This case demonstrates that no one is above the law.”
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