Judge Orders Early Bitcoin Investor to Surrender $124 Million in Crypto Keys

• A judge orders early Bitcoin investors to surrender keys worth $124M, highlighting rising crypto tax evasion cases.
• A Texas resident faces scrutiny over $1M tax evasion, following a legal move to access his crypto assets and private keys.
• U.S. government targets crypto tax fraud, requiring Ahlgren to disclose private keys after concealing Bitcoin profits.

As per Bloomberg, an early Bitcoin investor has been ordered to turn over encryption keys that could unlock about $124 million in Bitcoin by a federal judge. The action is a part of the U.S. government’s larger pursuit of digital assets associated with tax evasion. 

Texas citizen Richard Ahlgren was ordered by U.S. District Judge Robert Pitman on Monday to reveal any private keys and identify any hardware wallets or other devices that he uses to store his cryptocurrency assets. The case highlights the growing importance of cryptocurrency in legal disputes and tax cases.

Court Order and Restrictions

Besides providing access to his private keys, Ahlgren and his associates are prohibited from transferring or hiding any digital assets without prior court approval. The order allows for the use of funds strictly for “normal monthly living expenses,” adding another layer of scrutiny over the investor’s financial activities. This legal move follows Ahlgren’s conviction in December 2024 for tax evasion, with the goal of recovering approximately $1 million in restitution.

The Department of Justice (DOJ) had earlier accused Ahlgren of deliberately inflating his capital gains and hiding his Bitcoin transactions. Moreover, federal prosecutors accused him of using advanced techniques to obscure his crypto dealings, including multiple wallets, in-person transfers, and mixers to conceal his earnings.

The Background of the Case

When the price of Bitcoin was approximately $465 in 2015, Ahlgren bought about 1,366 of them. When the price of Bitcoin jumped to $5,800 in 2017, Ahlgren sold around half of his holdings for $3.7 million. Ahlgren, however, reduced the reported capital gains in his 2017 tax return by misreporting the Bitcoin’s cost basis. Additionally, he avoided paying taxes on more than $1 million in profits by selling more Bitcoin between 2018 and 2019 but neglected to disclose these sales on his tax forms.