IRS CI is Targeting Cryptocurrency Cases Involving Fraud and Other Crimes

Posted in Hot Topics, Offshore Account Update on January 21, 2022 | Share

Cryptocurrency enforcement has become a major priority for the Internal Revenue Service’s Criminal Investigations Division (IRS CI). The division seized $3.5 billion in cryptocurrency in 2021, which accounted for 93 percent of all seizures for the year. Although IRS CI is targeting individuals and organizations for tax crimes in some of these cases, it is pursuing other charges as well. Washington D.C. tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, explains.

IRS CI Cryptocurrency Investigations Often Target Multiple Crimes

While IRS CI is pursuing criminal tax cases and criminal tax audits against cryptocurrency investors suspected of failing to report their income to the federal government, it seems to be prioritizing large-scale cases in which the individuals and organizations involved are also suspected of committing other crimes. Over the past few months, IRS CI has issued several press releases touting its success in these types of cases. For example:

  • In October 2021, IRS CI announced that three individuals had pled guilty to “various financial crimes” as a result of their involvement in an unlicensed money transmitting business that bought and sold Bitcoin before “structuring” cash deposits to evade detection and reporting requirements.
  • Also in October, IRS CI announced that the founders of a cryptocurrency company had pled guilty to tax evasion after raising approximately $24 million in a fraudulent initial coin offering (ICO). Their guilty pleas followed a civil settlement with the Securities and Exchange Commission (SEC) resolving allegations of investor fraud.
  • In November 2021, IRS CI announced wire fraud and money laundering charges against an individual suspected of running several online high-yield investment scams, netting him more than $5 million in cryptocurrency.
  • Also in November, IRS CI announced that a federal court would begin liquidating $57 million in cryptocurrency seized in connection with the BitConnect fraud conspiracy—an effort that IRS CI states, “is believed to be the largest single recovery of cryptocurrency for victims to date.”
  • In another November press release, IRS CI announced that the target of a federal investigation received a 36-month prison sentence for “operating an unlicensed business that exchanged at least $13 million in Bitcoin and cash, often for drug traffickers.” The target had pled guilty to operating an unlicensed money transmitting business and money laundering.

These types of cases present serious risks for the individuals and organizations targeted. By pursuing charges for conspiracy, wire fraud, money laundering and other crimes, IRS CI is able to work with federal prosecutors to secure convictions even when the division does not have evidence of cryptocurrency-related tax crimes. At the same time, pursuing these types of high-value and high-profile cases presents an opportunity for IRS CI to send a message to cryptocurrency investors and others. As a result, we expect IRS CI to continue prioritizing these types of cases in 2022 and beyond.

Request an Appointment with Washington D.C. Tax Lawyer Kevin E. Thorn

Washington D.C. tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, represents individuals and organizations facing allegations of cryptocurrency-related crimes. To schedule a confidential consultation with Mr. Thorn as soon as possible, call 202-349-4033, email or request an appointment online today.

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