Man Pleads Guilty to Submitting False Tax Returns Tied to $13M CryptoPunks Sales

A Pennsylvania man could face up to six years in prison after pleading guilty to filing false tax returns that concealed millions of dollars in income from sales of CryptoPunks.

Waylon Wilcox, 45, admitted in federal court on April 9 to underreporting more than $13 million in income from 97 CryptoPunks transactions across 2021 and 2022. 

The unreported gains slashed his tax bill by more than $3.2 million, according to the U.S. Attorney’s Office for the Middle District of Pennsylvania.

CryptoPunks, an NFT series of 10,000 algorithmically generated pixel characters, were one of the most sought-after collections during the digital collectibles craze in 2021 and 2022. 

Though today they have a floor price of 42.49 ETH (just under $69,000), at their height in August 2021, they sold for a minimum of 125 ETH (worth almost $479,000 at the time), according to CoinGecko.

In dollar terms, the collection is down 85.7% from that all-time high. Just last week, a CryptoPunks holder sold their NFT for $6 million, incurring a $10 million loss on the trade.

According to court filings, Wilcox sold 62 Punks in 2021 for $7.4 million, and another 35 in 2022 for nearly $4.9 million.

But when asked on both years’ tax returns whether he had disposed of any digital assets, Wilcox allegedly checked “no.” 

Prosecutors say the misrepresentations allowed him to dodge $2.18 million in taxes in 2021 and $1.09 million in 2022.

“IRS Criminal Investigation is committed to unraveling complex financial schemes involving virtual currencies and non-fungible token transactions designed to conceal taxable income,” Yury Kruty, Philadelphia Field Office Special Agent in Charge, said in a statement. 

“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.”  

The Attorney’s Office warned that when a taxpayer sells an NFT, they must report sales proceeds and any gains or losses from the sale of the NFT on their tax return.

The charges against Wilcox carry a maximum penalty of up to six years in prison, a term of supervised release, and a fine under federal law.

Edited by Sebastian Sinclair