Bitcoin investor becomes first citizen ordered to hand over private keys to court

• Early Bitcoin investor sentenced to two years for tax fraud.
• The court has banned the movement of Ahlgren’s crypto assets without prior approval.

In a significant legal development, Frank Richard Ahlgren III, an early Bitcoin [BTC] investor, is now in prison for tax fraud related to his cryptocurrency sales.

For those unaware, Ahlgren had falsely underreported capital gains on over $3.7 million in BTC transactions between 2017 and 2019. This, in turn, led to a $1.1 million restitution owed to the U.S. government.

Orders issued by U.S. officials

As part of the legal proceedings, U.S. officials have ordered Ahlgren to surrender his cryptocurrency holdings. This includes all wallet private keys and access codes. 

In December, prosecutors requested that Judge Robert Pitman compel Ahlgren to reveal the location of at least 1,287 Bitcoin he moved in 2020 through a “mixing” service designed to obscure the crypto tokens’ traceability.

These tokens, which have more than doubled in value over the past year, are now worth over $124 million.

That being said, the Austin resident has become the first American convicted of tax crimes related exclusively to crypto asset sales.

As of now, Ahlgren has agreed to pay $1 million in restitution to cover tax losses from the underreporting of capital gains on the sale of $3.7 million in Bitcoin. He used some funds to purchase a property in Park City, Utah.

Prosecutors noted that Ahlgren’s property,

“Cannot be attached by ordinary physical means.”

Following this, the government asked,

 “Not only to restrain any virtual currency by order of this court, but to obtain the private keys to enable it access so that it cannot be moved by others. Should the private keys be lost or destroyed, the virtual currency is irretrievable.”

Extra measures taken by Judge Pitman

Judge Pitman also directed the parties to disclose all crypto accounts linked to Bitcoin, Bitcoin Cash, Bitcoin Gold, Ether, or Litecoin.

Moreover, the court has imposed a ban on any movement of Ahlgren’s cryptocurrency without prior court approval.

This order restricts any actions that could conceal, devalue, or diminish the assets, except for those used for “normal monthly living expenses.”

The order remains in effect until Ahlgren fulfills his restitution obligations or until further notice from the court. 

Ahlgren pleaded guilty on the 12th of September. He was sentenced on the 12th of December and will comply with the court’s order, according to his attorney, Dennis Kainen.

As expected, Kainen simply said,

“We will comply with a court directive, or to the extent that we have a question, we will direct it to the court. We appreciate the care that Judge Pitman has taken throughout this case.”