NFT traders face prison for $13 million tax fraud on Cryptopunk profits

Inappropriate token (NFT) traders could face up to six years of prison after admitting they underreported nearly $13 million in profits from crypto plant trading, according to the US Law Office for the Central District of Pennsylvania.

Waylon Wilcox, age 45, has approved the filing of false income tax returns for the 2021 and 2022 tax years. The former Cryptopunk investor pleaded guilty to two counts of filing a false personal income tax return on April 9, federal prosecutors said in an April 11 press release.

In April 2022, Wilcox filed an incorrect personal income tax return for the 2021 tax year. This underreported income taxes at about $8.5 million and reduced taxes by about $2.1 million.

In October 2023, Wilcox filed another false personal tax income return in 2022, underreporting income taxes with an estimated $4.6 million, and reducing taxes nearly $1.1 million.

“The maximum total penalties under federal law for these crimes are up to six years in prison, the duration of supervised release after incarceration, and fines,” the statement said. However, the exact details and timing of his sentence remain unknown.

Related: NFT Traders are selling Cryptopunk with a loss of $10 million a year later

Traders bought and sold 97 of the Cryptopunk NFT Collection, the largest NFT collection in the industry, with a market capitalization of $687 million.

In 2021, Wilcox sold 62 Cryptopunk NFTs with a profit of around $7.4 million, but reported significant tax reports. In 2022, he sold 35 crypto plants for $4.9 million. The Justice Department said Wilcox deliberately chose “no” when asked if he had engaged in digital asset transactions in both filings.

“The IRS Criminal Investigation is committed to unlocking complex financial schemes that include cryptocurrencies and NFT transactions designed to hide taxable income.”

“In today's economic environment, it's more important than ever that Americans are convinced that everyone plays according to the rules and pays the taxes they owe.”

The case was investigated by the Internal Revenue Service (IRS) and the Criminal Investigation Division.

Related: CZ applauds for “baseless” US plea bargain claim

Crypto tax rules gain traction

After the IRS issued new cryptographic regulations, the tax laws encrypted in June 2024 attracted worldwide attention.

Since January, centralized Crypto Exchanges (CEXS) and other brokers have to report the sale and exchange of digital assets, including cryptocurrencies.

On April 10, US President Donald Trump signed a joint council resolution to overturn Biden-era laws that required distributed finance (DEFI) protocols to report transactions to the IRS.

The so-called IRS Defi Broker rules, which are expected to come into effect in 2027, will need to expand the existing reporting requirements of tax authorities to disclose gross revenue from Crypto sales, including the Defi platform.

However, some cryptocurrency advisors believe that Stablecoin and Crypto Banking laws should take priority as new US tax law priorities.

“Adjusted regulatory approaches” in areas including securities law and “banking obstacles” are a priority for US lawmakers who have “more inverses” for the industry.

https://www.youtube.com/watch?v=3dyench-2is

Magazine: SEC U-turn on Crypto leaves important questions unanswered