Waylon Wilcox, a 45-year-old man from Dillsburg, Pennsylvania, has pleaded guilty to underreporting his income to the IRS, avoiding millions of dollars in tax payments related to his sale of nearly 100 CryptoPunk NFTs.
According to the U.S. Attorney’s Office for the Middle District of Pennsylvania, Wilcox received over $13 million from his sales of 97 CryptoPunks in 2021 and 2022, but failed to disclose the sales on his taxes, avoiding nearly $3.3 million in tax payments. The legal case appears to be the first major case regarding tax evasion from NFT sales in the U.S.
The guilty plea came shortly before the April 15 deadline for most U.S. taxpayers to file their 2024 taxes with the IRS. When a U.S. taxpayer sells virtual currency, they must recognize any capital gain or loss on the sale, subject to any limitations on the deductibility of capital losses, according to IRS guidance.
Local news site Daily Voice reported that Wilcox's girlfriend at one point asked for donations on Facebook to cover costs associated with her daughter's beauty pageants.
“IRS Criminal Investigation is committed to unraveling complex financial schemes involving virtual currencies and non-fungible token (NFT) transactions designed to conceal taxable income,” said Philadelphia field office special agent in charge Yury Kruty in a press release. "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 sentence of six years in prison, though his guilty plea will likely reduce his time served.
The CryptoPunk sales occurred in 2021 and 2022, at the height of the NFT boom; NFT trading has greatly reduced since then, with a recent CryptoPunk sale inking a $10 million loss for its owner. CryptoPunks remains the largest NFT project by market cap, according to CoinGecko data.
The floor price of CryptoPunks has increased significantly in ETH terms over the past six months, but the declining price of ether means a CryptoPunk is only worth marginally more in dollar terms: the floor price was around $66,900 six months ago, and is now around $68,800, according to The Block's data.
Yuga Labs incited controversy last May by launching a spin-off collection called Super Punk World, based on the CryptoPunk brand, which Yuga, best known as the creators of the Bored Ape Yacht Club NFT collection, acquired in March 2022.
Following the backlash, Yuga CEO Greg Solano said the company would "no longer touch" the collection. "“[CryptoPunks] will just be decentralized and preserved on the blockchain. The only thing we intend to do is support a few museums and institutions in their quest to acquire a Punk and help educate their audience about them,” Solano said.
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