TLDR
- Pennsylvania man Waylon Wilcox pleaded guilty to filing false tax returns that concealed over $13 million in CryptoPunks NFT sales
- He sold 97 CryptoPunks across 2021-2022 but claimed on tax forms he hadn’t disposed of any digital assets
- His unreported income reduced his tax obligation by approximately $3.2 million
- The case was investigated by IRS Criminal Investigation’s Philadelphia Field Office
- Wilcox faces up to six years in prison, supervised release, and fines
A Pennsylvania man has admitted to hiding millions in cryptocurrency profits from tax authorities. Waylon Wilcox, 45, of Dillsburg, Pennsylvania, pleaded guilty on April 9 to filing false income tax returns that concealed over $13 million from sales of CryptoPunks NFTs.
Court documents reveal that Wilcox sold 97 CryptoPunks between 2021 and 2022, generating substantial profits. In 2021, he sold approximately 62 CryptoPunks for about $7.4 million.
The following year, he sold another 35 CryptoPunks for nearly $4.9 million. Despite these transactions, Wilcox explicitly answered “no” when his tax forms asked if he had disposed of any digital assets.
The false statements allowed Wilcox to dodge approximately $2.18 million in taxes for 2021. He evaded another $1.09 million in 2022, bringing his total tax evasion to over $3.2 million.
What Are CryptoPunks?
CryptoPunks is a collection of 10,000 unique pixel art characters that exist as non-fungible tokens (NFTs) on the Ethereum blockchain. These digital collectibles became highly sought after during the NFT boom of 2021-2022.
At their peak in August 2021, CryptoPunks had a floor price of 125 ETH, worth almost $479,000 at the time. The collection has since cooled considerably but still commands prices around 42.49 ETH (approximately $69,000) per NFT.
Each CryptoPunk contains digital proof of ownership tracked on the blockchain. While two Punks might look similar, they are not interchangeable, making them non-fungible tokens that can be traded for money or cryptocurrency.
Tax Implications for NFT Sales
The case highlights the tax responsibilities that come with digital asset transactions. According to the U.S. Attorney’s Office, when taxpayers sell NFTs, they must report both the sales proceeds and any gains or losses on their tax returns.
Wilcox’s case serves as a warning to crypto investors. The IRS is actively pursuing those who fail to report digital asset transactions.
“IRS Criminal Investigation is committed to unraveling complex financial schemes involving virtual currencies and non-fungible token transactions designed to conceal taxable income,” said Yury Kruty, Philadelphia Field Office Special Agent in Charge.
The investigation was conducted by the Internal Revenue Service, Criminal Investigation division. Assistant U.S. Attorney David C. Williams is prosecuting the case in the Middle District of Pennsylvania.
Interest in CryptoPunks continues despite the market cooldown. Just last week, a CryptoPunk sold for $6 million in Ethereum, though this still represented a $10 million loss for the seller who had purchased it at a higher price in March 2024.
The charges against Wilcox carry serious consequences. He faces a maximum penalty of up to six years in prison.
He could also receive a term of supervised release following imprisonment. The court may impose fines based on federal sentencing guidelines.
Wilcox appeared before Senior United States District Judge Malachy E. Mannion to enter his guilty plea. The judge will determine the final sentence after considering the applicable federal sentencing statutes and guidelines.
The case is part of broader efforts by federal authorities to ensure tax compliance in cryptocurrency markets. Kruty emphasized the importance of these enforcement actions.
“In today’s economic environment, it’s more important than ever that the American people feel confident that everyone is playing by the rules and paying the taxes they owe,” he stated.
