IRS Builds Hundreds of Crypto Tax Evasion Cases

Hundreds of crypto-related cases are piling up in the Criminal Investigations Division of the Internal Revenue Service (IRS).

Many of these cases will soon be made public, most of which are tax-related, according to division chief Jim Lee.

Tax evasion with crypto

As reported per Bloomberg Tax, some of the most common cases in its division relate to scaling up (exchanging crypto for fiat currency) and not reporting crypto-based compensation.

“Over the past three years, I’ve really seen a change,” the interviewer said. While most cases were once related to money laundering, tax cases now account for around half of the number.

Crypto has a solid reputation as a tool for criminal activity, such as scams and ransomware. However, money laundering has constantly compound a smaller portion of crypto-based activity over time as blockchain forensics firms like Chainalysis grow more sophisticated tools to track criminal transfers.

The Treasury Department also admitted that cryptocurrency laundering, while a problem, still has far less of an impact than fiat-based laundering right now.

On the contrary, the tools facilitating the use of cryptography usher in its adoption as a means of payment all over the world, whether for buy sports tickets Where receive a salary. Because on-chain transactions are pseudonymous, it is less straightforward for a government to see who is receiving what funds.

Still, Lee said his department can effectively trace almost any cryptocurrency transaction. That of division Annual Reportwhich fell on Thursday, details some of its most successful foreclosures this year.

One was linked to the arrest of ‘Ilya Lichtenstein and his wife, Heather Morgan (aka “Razzlekhan”) for the alleged laundering of stolen money in 2016 Hack Bitfinex. It was the largest financial seizure related to digital assets in the department’s history.

According to Lee, the division has seized $7 billion worth of crypto in total since the start of fiscal 2022.

Privacy tools

While the transparent nature of the blockchain has been a boon to law enforcement, regulators have been wary of crypto tools that attempt to enhance the privacy of crypto owners’ transactions.

Among them is Tornado Cash, which the Treasury Department sanctioned in August for its use in criminal activity. Unlike previous sanctions, this was the first ever imposition of trade restrictions on open source software. While many institutions like Coinbase and Circle quickly complied with the rules, crypto industry chiefs were still very critical of the move.


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