The landmark ruling came after the Bitcoin investor failed to report large gains from cryptocurrency trading.
A Texas federal court judge ordered Frank Richard Ahlgren III, an early Bitcoin investor, to hand over his crypto public and private keys, accounts and access codes after the defendant was sentenced to two years in prison for about $1.1 million in tax fraud.
The landmark case of the crypto-related tax crime started in early 2024 when a federal grand jury indicted the crypto investor for filing false tax returns and structuring cash deposits to evade reporting requirements. Ahlgren was an early investor in bitcoins. In 2015, the man purchased approximately 1,366 bitcoins, then valued at about $500 each. Between 2017 and 2019, Ahlgren allegedly sold approximately $4 million worth of bitcoin, including a $3.7 million sale used to purchase a residence place in Park City, Utah, and failed to report these transactions on his tax returns accurately. Additionally, he was accused of making multiple cash deposits under $10,000 to circumvent currency transaction reporting laws. Prosecutors said he used multiple wallets, a combination of in-person transfers and crypto mixers, to conceal transaction details.
After a lengthy investigation, Ahlgren pleaded guilty to filing a false tax return. In December 2024, Ahlgren was sentenced to two years in prison and one year of supervised release after this term for tax fraud, owing the US government about $1.1 million in restitution.
On January 6, 2025, Judge Robert Pitman of the Austin Federal Court directed Ahlgren, as well as his family, friends, or representatives, to disclose and hand over any physical devices used for storing his cryptocurrency, along with associated public keys, private keys, seed phrases, or passphrases.
Ahlgren’s case represents not only the first criminal tax evasion prosecution focused exclusively on cryptocurrency but also a notable precedent of the order to surrender a criminal’s crypto wallet credentials. This decision sets a precedent for authorities to access crypto holdings in legal disputes, underscoring the importance of tax compliance in the digital asset space. The case highlights the increasing scrutiny of cryptocurrency assets by regulators and its implications for privacy and ownership.
