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In a landmark tax evasion case, Texas Bitcoin investor Frank Richard Ahlgren III has been ordered by a federal court to surrender his private cryptocurrency keys following a conviction for underreporting capital gains from $3.7 million in Bitcoin sales between 2017 and 2019.

The ruling, issued by Austin Federal Court Judge Robert Pitman on Jan. 6, mandates that Ahlgren disclose all devices storing his cryptocurrency and provide associated private and public keys, seed phrases, and passphrases.

This order extends to accounts involving Bitcoin, Bitcoin Cash, Bitcoin Gold, Ether, and Litecoin.

Ahlgren, who pleaded guilty in September 2024 to filing a false tax return, was sentenced to two years in prison and an additional year of supervised release. He owes approximately $1.1 million in restitution to the U.S. government.

The court has barred Ahlgren and his associates from manipulating or transferring his crypto assets without permission, except for living expenses, until restitution is paid or further orders are issued.

Lucy Tan, from IRS-Criminal Investigation, described this as the first U.S. criminal tax evasion case focused exclusively on cryptocurrency.

Ahlgren had initially bought 1,366 Bitcoin in 2015 at around $465 each, later selling half for $3.7 million when the price hit $5,800. He then inflated the cost basis to minimize his tax liability and did not report subsequent sales amounting to over $650,000.

His attempts to hide transactions through various methods led to significant tax losses.

This case highlights the increasing regulatory attention on cryptocurrency and serves as a warning about the importance of accurate tax reporting for digital assets.

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