In a groundbreaking case, a Texas Bitcoin investor, Frank Richard Ahlgren III, has been ordered to surrender his cryptocurrency wallet keys and access codes following a conviction for tax fraud. The federal court ruling, which mandates the disclosure of private keys, marks a significant precedent in how authorities handle crypto-related tax evasion cases.

Ahlgren, sentenced in December to two years in prison, was found guilty of underreporting capital gains from over $3.7 million in Bitcoin sales between 2017 and 2019. He owes approximately $1.1 million in restitution to the U.S. government. The court’s restraining order extends beyond Ahlgren, requiring his family, friends, and representatives to hand over any crypto-related devices, keys, or seed phrases.

Judge Robert Pitman of the Austin Federal Court also restricted the transfer of Ahlgren’s crypto assets without prior court approval, except for essential living expenses. The order remains effective until full restitution is made or further court directives are issued.

Ahlgren's fraudulent activities began in 2015 when he purchased 1,366 Bitcoin for around $465 each via Coinbase. By 2017, he sold half at $5,800 per Bitcoin, earning $3.7 million. However, he significantly inflated the cost basis in his tax filings to reduce his taxable gains. Additionally, between 2018 and 2019, he sold Bitcoin worth over $650,000 without reporting these transactions. Prosecutors revealed that Ahlgren used multiple wallets, mixers, and in-person transfers to obscure his activities, resulting in over $1 million in tax losses.

This case, noted as the first criminal tax evasion prosecution focused entirely on cryptocurrency, underscores growing scrutiny on digital assets. Lucy Tan, acting special agent of IRS-Criminal Investigation, highlighted its significance in the fight against crypto-enabled tax fraud.