A federal judge has ordered an early Bitcoin investor to hand over encryption keys that could unlock around $124 million in cryptocurrency. This move is significant in the U.S. government's efforts to seize digital assets in tax evasion cases.
On Monday, U.S. District Judge Robert Pitman issued the order. Ahlgren must disclose all private keys and identify any devices he used to store his crypto, including hardware wallets.
This order goes beyond wallet access. Ahlgren and his associates cannot transfer or hide any digital assets without court approval. However, they can use funds for normal monthly living expenses.
The goal is to help recover about $1 million in restitution following Ahlgren's conviction last December. Bloomberg was the first to report on this order.
Last February, federal prosecutors indicted Richard Ahlgren III, known as "Paco." This marked the first U.S. criminal case focused solely on tax evasion through crypto trading.
Ahlgren, a resident of Austin, Texas, faced three counts of filing false tax returns and four counts of illegal cash deposit structuring. By December, he received a two-year prison sentence for falsely reporting capital gains from selling $3.7 million worth of Bitcoin.
Acting Deputy Assistant Attorney General Stuart M. Goldberg said, "Instead of paying the taxes he knew were due, he lied to his accountant about the extent of his gains."
Goldberg added that Ahlgren tried to hide more of his profits using sophisticated techniques to obscure his transactions on the Bitcoin blockchain.
The indictment explains how Bitcoin transactions work. While the blockchain is public, Ahlgren allegedly attempted to conceal his activities through various methods.
What makes Ahlgren's case notable is its focus on the manipulation of crypto cost basis calculations. It sets a precedent for future tax enforcement in the crypto space.
U.S. regulators are taking a stronger enforcement approach. Meanwhile, Congress is still working on clear regulations for crypto assets. A 2024 industry review by blockchain forensics firm Elliptic highlights this challenge.
Until significant changes in crypto legislation occur, the U.S. remains a tough regulatory environment for crypto market participants. The lack of progress in passing crypto-related legislation, combined with a heavy reliance on enforcement actions, adds to the complexity.