CryptoPunks Seller Pleads Guilty to Tax Fraud Over NFT Windfall

A U.S. citizen has confessed to tax fraud involving NFT trading. Between 2021 and 2022, he sold 97 non-fungible tokens from the highly valued CryptoPunks collection, generating approximately $13 million in income. Yet, in tax returns filed for those years, he falsely stated he had engaged in no digital asset transactions—resulting in more than $3.2 million in underpaid taxes.

Authorities concluded that the trader knowingly submitted inaccurate tax documents — first in April 2022 and again in October 2023 — despite having earned substantial income from selling NFTs prior to both filings.

Prosecutors clarified that the disposal of digital assets is subject to taxation under U.S. law, and failure to disclose such income constitutes criminal conduct.

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He confessed to the crime—twice. Now, with two counts of falsifying tax records on the table, he could spend up to six years in prison, pay a hefty fine, and remain under federal watch after his release.

It’s a landmark case: one of the first where U.S. authorities have brought criminal charges for failing to report NFT profits.

IRS Tightens the Reins on Crypto — Traders Take Note

The crackdown on unreported NFT profits isn’t isolated. Beginning January 2025, centralized exchanges and brokerages must provide detailed transaction data to the IRS—signaling a new era of regulatory vigilance in the digital asset space.

Specifically, this applies to:

• asset sales,
• token swaps,
• and any on-chain transfers.

The mandate is part of a wider push for industry-wide accountability. There is also growing debate about extending such oversight to DeFi platforms. 

The Biden team tried to make DeFi protocols report users’ earnings—but that proposal got scrapped in April 2025. Still, DeFi isn’t off the hook. Regulators are keeping it in sight, alongside plans for stricter tax rules across the entire crypto ecosystem.

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The IRS has made its position clear: virtual assets like crypto and NFTs are no longer beyond its reach. The agency has pledged to crack down on tax evasion involving digital assets, supported by strengthened compliance measures and updated reporting obligations.

The CryptoPunks case sends a strong message to the market. Anonymity is fading, and major NFT transactions—especially high-value sales—are increasingly in the IRS’s crosshairs.