Waylon Wilcox, 45, of Dillsburg, admitted to under-reporting his income by more than $13 million in 2021 and 2022, authorities said.
HARRISBURG, Pa. — A York County man pleaded guilty in federal court this week to two counts of filing false income tax returns after an investigation determined he omitted more than $13 million in income from digital art sales.
Waylon Wilcox, 45, of Dillsburg, obtained most of the unreported income by buying and selling 97 pieces of digital artwork from the “CryptoPunks” collection of more than 10,000 unique art characters.
The individual pieces from the collection are referred to as “Punks,” authorities said.
Each “Punk” was unique and contained digital proof of ownership that could be tracked on a blockchain, a digitally distributed, decentralized public ledger, according to authorities. Two “Punks” from the same blockchain could look identical, but were not interchangeable, meaning they were non-fungible.
These non-fungible tokens, or NFTs, could be traded or sold for cryptocurrency, authorities said.
In 2021, Wilcox sold 62 “Punks” for a total of approximately $7,402, 935, authorities said. In 2022, he sold 35 “Punks” for approximately $4,899,180.
But on his 2021 tax return, authorities said, Wilcox falsely answered “no” to the question “At any time in 2021, did you receive, sell, exchange, or otherwise dispose of financial interest in any virtual currency?”
In 2022, authorities said, Wilcox falsely answered “no” to the question “At any time during 2022, did you (a.) receive (as a reward, award, or payment for property or services), or (b.) sell, exchange, gift or otherwise dispose of a digital asset (or financial interest in a digital asset)?”
As a result, Wilcox underreported his 2021 income by approximately $8.5 million and reduced his tax then due and owing by nearly $2.2 million, and underreported his 2022 income by nearly $4.6 million, reducing his tax then due and owing by nearly $1.1 million.
When a taxpayer sells an NFT like a “Punk,” they must report sales proceeds and any gains or losses from the NFT on their tax return, authorities said.
“IRS Criminal Investigation is committed to unraveling complex financial schemes involving virtual currencies and non-fungible token transactions designed to conceal taxable income,” said Yury Kruty, Philadelphia Field Office Special Agent in Charge for IRS Criminal Investigations. “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.”
Wilcox faces a maximum penalty of six years in prison, a period of supervised release and a fine.
