On December 12, 2024, Frank Richard Ahlgren III of Austin, Texas, was sentenced to two years in prison for filing a false tax return, marking the first legal-source cryptocurrency income tax case. The case has garnered attention for its significance in cryptocurrency tax enforcement, as it represents a prosecution based purely on tax issues rather than other criminal activity. Legal experts and defense attorneys alike have praised the case for its role in setting a precedent for how the government will approach cryptocurrency tax fraud in the future.

In a December 16, 2024, article, TaxNotes covered the case and its implications for cryptocurrency tax enforcement. Gray Reed Partner Joshua Smeltzer was among the experts interviewed, offering insights on the significance of the case for future cryptocurrency tax prosecutions. Board Certified in Tax Law by the Texas Board of Legal Specialization, Joshua uses his experience as a former litigator for the U.S. Department of Justice to defend clients in tax audits, tax appeals, and litigation in Federal District Court, U.S. Tax Court, the U.S. Court of Federal Claims, and tax issues in U.S. Bankruptcy Court.

Excerpt:

“Given the ever-increasing adoption of digital assets, the number of cases will likely increase now
that the government has tested its first litigation strategy. Taxpayers now have a glimpse into how
future tax prosecutions involving digital assets will be handled and can plan accordingly to protect
their rights and prepare and present their best defense,” Joshua D. Smeltzer of Gray Reed, one of
Ahlgren’s defense attorneys, told Tax Notes in an email.

“Although the charges were common tax charges, the prosecution involved several novel aspects and
arguments based on the uniqueness of digital assets and how they are maintained, managed, and
reported,” Smeltzer said. The court spent time considering all the issues raised by this “first of its
kind criminal tax case,” he said.

Read the full article here.