Waylon Wilcox of Dillsburg, Pennsylvania, was sentenced on Apr. 23 to 12 months in prison and fined $300,400 for filing false income tax returns that omitted over $13 million in income from digital artwork sales. Senior United States District Judge Malachy E. Mannion imposed the sentence after Wilcox had previously paid the Internal Revenue Service more than $3.3 million in back taxes and nearly $1 million in interest.
The case highlights efforts by federal authorities to address tax evasion involving digital assets such as non-fungible tokens (NFTs). Prosecutors said Wilcox underreported his income by more than $8.5 million for the 2021 tax year and by about $4.6 million for 2022, reducing his owed taxes by over $3 million across both years.
Wilcox's unreported earnings came primarily from buying and selling NFTs known as "CryptoPunks," a collection of unique digital art pieces tracked on blockchain technology. In total, he sold approximately 62 CryptoPunks in 2021 for around $7.4 million and another 35 in 2022 for roughly $4.9 million.
“When a U.S. taxpayer deliberately falsifies a tax return, it undermines the integrity of our tax system and contributes to the tax gap that impacts every American,” said Yury Kruty, Special Agent in Charge at IRS Criminal Investigation’s Philadelphia Field Office. “In this case, Wilcox made millions from the sale of NFTs but willfully evaded paying the taxes he owed... Let this case serve as a warning – whether income is earned through traditional employment or the sale of digital assets, all taxpayers are required to report their earnings and pay their fair share.”
The investigation stemmed from a lead generated during an international cyber challenge organized by the Joint Chiefs of Global Tax Enforcement (J5), which includes agencies from Australia, Canada, the Netherlands, United Kingdom, and United States focusing on financial crimes involving cryptocurrencies.
Assistant United States Attorney Joseph J. Terz prosecuted the case.
The U.S. Attorney's Office for the Middle District of Pennsylvania handles prosecutions of federal crimes including those related to financial frauds such as this one according to its official website. The office operates under the Department of Justice according to its official website and serves about 3.2 million residents across central Pennsylvania’s jurisdiction covering over twenty-one thousand square miles according to its official website. Facilities are maintained in Harrisburg, Scranton, Williamsport and Wilkes-Barre according to its official website.
