A crypto hedge fund manager was sentenced to 37 months in prison this week for tax evasion after renouncing his U.S. citizenship. The case marks one of the highest-profile criminal tax prosecutions involving a digital asset investor who tried to shed his American status to avoid paying taxes on cryptocurrency gains.
The sentence
The manager pleaded guilty to one count of tax evasion. Court records show he renounced his U.S. citizenship in 2021, but prosecutors argued that the move did not wipe out his obligation to report and pay taxes on income earned while he was still a citizen. The judge imposed the 37-month term, along with a year of supervised release. Restitution and fines were not disclosed in the brief sentencing order.
Why renouncing didn't work
Under U.S. law, renouncing citizenship does not erase past tax liabilities. The IRS can still pursue criminal charges for tax evasion committed before the renunciation date. In this case, the manager failed to report substantial cryptocurrency trading profits from 2018 through 2020, according to the indictment. He also did not file required expatriation forms, which are mandatory for anyone giving up citizenship with a net worth above $2 million or a five-year average tax liability over a certain threshold.
The strategy backfired. Instead of escaping U.S. jurisdiction, the manager drew the attention of federal investigators. The sentence sends a clear signal: renouncing citizenship is not a loophole for crypto tax cheats.
