According to Cointelegraph, a non-fungible token (NFT) trader, Waylon Wilcox, could face up to six years in prison after admitting to underreporting nearly $13 million in profits from trading CryptoPunks. The U.S. Attorney’s Office for the Middle District of Pennsylvania revealed that Wilcox, 45, pleaded guilty to filing false income tax returns for the 2021 and 2022 tax years. On April 9, Wilcox admitted to two counts of filing false individual income tax returns, as stated by federal prosecutors in an April 11 press release.
In April 2022, Wilcox filed a false tax return for the 2021 tax year, underreporting his income by approximately $8.5 million and reducing his tax liability by about $2.1 million. Later, in October 2023, he submitted another false return for the 2022 fiscal year, underreporting his income by an estimated $4.6 million and decreasing his tax due by nearly $1.1 million. The total maximum penalty for these offenses under federal law is up to six years of imprisonment, a term of supervised release, and a fine. However, the specifics of his sentencing remain undetermined.
Wilcox was involved in buying and selling 97 pieces of the CryptoPunk NFT collection, which is the largest in the industry with a market capitalization of $687 million. In 2021, he sold 62 CryptoPunk NFTs for a gain of about $7.4 million but reported significantly less on his taxes. In 2022, he sold 35 more CryptoPunks for $4.9 million. The Department of Justice noted that Wilcox intentionally selected “no” when asked if he had engaged in digital asset transactions on both filings. IRS Criminal Investigation is dedicated to uncovering complex financial schemes involving virtual currencies and NFT transactions designed to conceal taxable income, according to Philadelphia Field Office Special Agent Yury Kruty.
The case was investigated by the Internal Revenue Service (IRS) and its Criminal Investigation Department. Crypto tax laws have gained global attention, especially after the IRS introduced new regulations in June 2024, requiring U.S. crypto transactions to be subject to third-party tax reporting. Since January, centralized crypto exchanges and other brokers must report digital asset sales and exchanges. On April 10, U.S. President Donald Trump signed a resolution overturning a Biden-era law that would have required decentralized finance protocols to report transactions to the IRS. Set to take effect in 2027, the IRS DeFi broker rule would have expanded reporting requirements to include DeFi platforms. Some crypto regulatory advisers argue that stablecoin and crypto banking legislation should take precedence over new tax laws in the U.S., advocating for a tailored regulatory approach to securities laws and banking obstacles.