In March 2022, a Pennsylvania man pleaded guilty to evading federal taxes. He failed to disclose over $13 million in income from the sale of almost 100 CryptoPunk NFTs. Waylon Wilcox, a 45-year-old of Avery, Idaho, was sentenced to a maximum of six years in prison for his tax-related offenses. His guilty plea is timely, coming just before the new IRS tax filing date of April 15.

If that’s the case, then Wilcox’s actions seem to be the first high-profile US tax evasion case linked to non-fungible tokens (NFTs). According to the US Attorney’s Office for the Middle District of Pennsylvania, Wilcox willfully concealed the questionable transactions. All of these activities happened from 2021 through the first part of 2022.

The Case Against Wilcox

An ongoing criminal probe recently revealed that one particularly prolific dealer—Waylon Wilcox—resold 97 of these CryptoPunks between 2021 and 2022 alone. This sale netted him over US$13 million in earnings. He did not report this income on his tax filings, resulting in approximately US$3.3 million in taxes he avoided paying. Under current IRS guidelines, the sale of your CryptoPunks would be a taxable event.

The US Attorney’s Office for the Middle District of Pennsylvania prosecuted Wilcox. They found that in fact he had intentionally hidden the deals. With every bit of income that he failed to report, Wilcox committed an egregious violation of federal tax laws and is now facing serious legal consequences.

Wilcox allegedly withheld their profits made off the NFTs without collecting millions in taxes. At the same time, his girlfriend was raising funds on Facebook to pay expenses for her daughter’s beauty pageant. This fact makes it all the more ironic that the case was ever brought.

Legal Implications and Sentencing

Waylon Wilcox’s guilty plea will almost assuredly result in a reduced sentence for him under federal sentencing guidelines. He’s still looking at up to six years in jail at most for those tax-related offenses. In addition, he will probably be required to pay restitution for the taxes he was avoiding.

Sentencing for Wilcox has not yet been scheduled. In determining Wilcox’s sentence, the court will weigh a number of factors, including how much Wilcox evaded in taxes and whether Wilcox cooperated with the investigation.

This case serves as a warning to those involved in the cryptocurrency and NFT space about the importance of accurately reporting income and paying taxes.

A Symbolic Case

Waylon’s case is both symbolic and hilarious. His guilty plea was the ultimate slap in the face to the timing, as it landed just before this year’s April 15 IRS tax deadline. This is meant to emphasize that the IRS is taking an aggressive approach to cryptocurrency and NFT transactions.

This case should send a strong message that the IRS is serious about pursuing tax evasion in this rapidly evolving digital asset space. Those who try to evade taxes on crypto or NFT transactions will be criminally charged.