NFT Trader Faces Six Years for Underreporting $13M in CryptoPunks Profits

An NFT trader, Waylon Wilcox, has pleaded guilty to underreporting nearly $13 million in profits from trading CryptoPunks and is now facing up to six years in prison. Federal prosecutors revealed that Wilcox admitted to filing false individual income tax returns for the tax years 2021 and 2022.

In April 2022, Wilcox filed a false individual income tax return for the 2021 tax year, underreporting approximately $8.5 million in income and underpaying approximately $2.1 million in taxes. He repeated this action in October 2023, filing another false return for the 2022 fiscal year, underreporting pre-tax income by around $4.6 million and underpaying nearly $1.1 million in taxes.

Wilcox's scheme involved intentionally selecting “no” when asked if he had engaged in digital asset transactions on both filings. This case was investigated by the Internal Revenue Service (IRS) and the Criminal Investigation Department, highlighting the increasing scrutiny on virtual currency and NFT transactions.

The IRS has been committed to unraveling complex financial schemes involving virtual currencies and NFT transactions designed to conceal taxable income. This case underscores the importance of transparency and compliance in the digital asset space, as the economic environment demands that everyone plays by the rules and pays the taxes they owe.

The case against Wilcox serves as a reminder of the legal consequences that can arise from tax evasion in the digital asset market. As the IRS continues to enforce tax regulations, it is crucial for traders and investors to accurately report their income from digital asset transactions. The maximum penalty under federal law for these offenses is up to six years of imprisonment, a term of supervised release following imprisonment, and a fine. The exact details and timing of Wilcox's sentence remain unclear.