Frank Richard Ahlgren III, an early Bitcoin investor from Texas, has been sentenced to two years in prison for tax fraud. 

According to the Department of Justice, Ahlgren underreported $3.7 million in Bitcoin (BTC) capital gains on his 2017 tax return and failed to disclose additional BTC sales worth $650,000 over the next two years.

Per the DOJ, “Ahlgren was an early investor in bitcoins and purchased bitcoins as early as 2011,” which places Ahlgren as a Satoshi-era investor. Satoshi era refers commonly to the period when Bitcoin’s pseudonymous creator, Satoshi Nakamoto, was active from late 2009 to 2011.

Ahlgren is reportedly the first Bitcoin investor to be jailed for crypto tax gains.

Ahlgren’s discreet transfers

Prosecutors revealed that Ahlgren manipulated the cost basis of his BTC transactions in 2017 to lower his reported capital gains, significantly reducing his tax liability. Ahlgren misrepresented the profits he earned from selling 640 BTC, which he used to buy a house in Utah.

From 2018 to 2019, Ahlgren concealed additional BTC sales through mixers, wallet transfers, and in-person cash exchanges. These actions caused over $1 million in tax losses.

U.S. District Court Judge Robert Pitman also ordered Ahlgren to pay $1.1 million in restitution and serve one year of supervised release following his prison term.