NFT trader faces prison for $13 million tax evasion

Waylon Wilcox, a 45-year-old NFT trader, has admitted to underreporting nearly $13 million in profits from the sale of CryptoPunk NFTs, facing up to six years in prison.

Wilcox pleaded guilty to filing false individual income tax returns for 2021 and 2022, according to the U.S. Attorney’s Office for the Middle District of Pennsylvania.

Prosecutors revealed that in April 2022, Wilcox filed a tax return for 2021 that underreported his income by approximately $8.5 million, reducing his tax liability by $2.1 million.

Similarly, in October 2023, he submitted another false return for 2022, underreporting $4.6 million in income and cutting his tax due by $1.1 million.

The Department of Justice stated that Wilcox deliberately answered "no" when asked if he had engaged in digital asset transactions on both filings.

Over the two years, Wilcox sold a total of 97 CryptoPunk NFTs—62 in 2021 for $7.4 million and another 35 in 2022 for $4.9 million.

CryptoPunks are one of the most valuable NFT collections, with a market capitalisation of $687 million.

Wilcox’s case highlights the growing scrutiny on digital asset transactions by authorities.

“IRS Criminal Investigation is committed to unraveling complex financial schemes involving virtual currencies and NFT transactions designed to conceal taxable income,” said Yury Kruty, Special Agent in charge at the IRS Philadelphia Field Office.

The maximum penalty for Wilcox’s offenses includes up to six years of imprisonment, supervised release, and fines.

However, details regarding sentencing remain unclear.

This case underscores broader efforts by U.S. regulators to enforce crypto-related tax laws.

In June 2024, the IRS introduced new rules requiring centralised exchanges and brokers to report digital asset transactions.

A proposed regulation targeting decentralised finance (DeFi) platforms is set to take effect in 2027 but has faced opposition from lawmakers prioritising tailored approaches for securities and banking legislation.