The Internal Revenue Service’s (IRS) Criminal Investigation branch made a list of the top ten “most prominent and high-profile” cases it examined in 2023, four of which involved cryptocurrency.
Our investigators took down international tax schemes that preyed on people’s personal information, investigated multi-level marketing schemes involving cryptocurrency, and uncovered one of the largest fraud schemes in history centered around renewable fuel credits.
Division chief Jim Lee
IRS narrows down to crypto scams
The IRS section stated in a Dec. 11 notice that there would be four big cases in 2023 involving the seizure of crypto, fraudulent practices, money laundering, and other scams. OneCoin co-founder Karl Sebastian Greenwood was sentenced to 20 years in jail in September for his part in marketing and selling a fake crypto asset, making him the third most high-profile probe in the past year.
1. Bitcoin billionaire OneCoin’s co-founder sentenced to 20 years in prison
The case comes at number 3. Karl Sebastian Greenwood, a Swedish and British citizen who co-founded OneCoin with Ruja Ignatova, aka the Cryptoqueen, was sentenced to 20 years in prison and compelled to pay a $300 million forfeiture for his role in the enormous OneCoin fraud scam.
OneCoin, based in Sofia, Bulgaria, commenced operations in 2014 and advertised and sold counterfeit crypto by the same name via a global multi-level marketing network. Millions of victims invested nearly $4 billion in the bogus crypto OneCoin as a result of misrepresentations made by Greenwood, Ignatova, and others.
2. Bitcoin money laundering scheme netted New Hampshire guy 8 years in prison
The case comes at number 4 of the 10 counts by the IRS. In October 2023, Ian Freeman was sentenced to 96 months in jail and two years of supervised release. Per the IRS reports, Ian has to pay a $40,000 fine for converting US cash for Bitcoin to launder over $10 million in earnings from romance scams and other internet fraud.
Freeman was ordered to pay victims restitution in an amount to be determined later. Freeman created a business that catered to fraudsters by failing to register his business with the Financial Crimes Enforcement Network as required by law, disabling anti-money laundering features on his Bitcoin kiosks, and ensuring that crypto customers did not tell him what they did with their Bitcoin.
As part of the conspiracy, Freeman and his co-conspirators opened and operated accounts at financial institutions in the names of various churches, including the Shire Free Church, the Church of the Invisible Hand, the Crypto Church of New Hampshire, and the NH Peace Church, according to records and exhibits presented at his trial.
According to the IRS, Freeman encouraged crypto clients, who were frequently victims of scams, to tell financial institutions that their payments were church donations. He paid no taxes and hid his income from the Internal Revenue Service from 2016 to 2019.
3. The famous Silk Road Bitcoin illegal triad
The case comes at number 7. In September 2012, James Zhong was sentenced to one year and one day in jail for wire fraud after illegally obtaining around 50,000 bitcoins from the Silk Road dark web online marketplace. Over the course of over ten years, Zhong carried out a complicated operation to steal the 50,000 bitcoins, then concealed his activities by transferring the bitcoins to a number of different addresses under his control.
This was done in order to avoid detection, disguise his identity and ownership, and obscure the source of the Bitcoin. Zhong was ordered to forfeit all of his Bitcoin, which was valued at approximately $3.4 billion at the time of forfeiture; his 80% interest in RE&D Investments LLC, a Memphis-based company with substantial real estate holdings; $661,900 in seized US currency; and gold and silver bars and coins seized from his home as part of his sentencing.
4. ‘Bruno Block’ sentenced to 4 years in prison
Amir Bruno Elmaani, alias Bruno Block, the founder of the cryptocurrency Oyster Pearl, was sentenced to 48 months in federal prison and made to pay more than $5.5 million in restitution for tax evasion related to the Pearl token. Elmaani began pushing Pearl tokens, a new crypto, in September and October of 2017.
Elmaani indicated that he intended to create the Oyster Protocol, an online data-storage platform that would allow users to purchase online data storage with Pearl tokens. Elmaani acted as a nominee for friends and family to obtain crypto revenues and transfer them to his accounts.
Elmaani did not submit a tax return in 2018 and reported no income to the IRS. In 2018, Elmaani spent more than $10 million on multiple yachts, $1.6 million at a carbon-fiber composite company, hundreds of thousands of dollars at a home improvement store, and more than $700,000 on two homes, one of which was titled in the name of a shell company and the other in the names of two of his associates. Elmaani’s actions resulted in a $5.5 million tax loss.
Other than that:
In its annual report released on December 4, the IRS criminal investigative section claimed that it had begun more than 2,676 cases in the fiscal year 2023, totaling more than $37 billion in tax and financial offenses. Since 2015, the government has seized more than $10 billion in crypto.
The number 1 fraud scheme went to Utal Fuel plant operators. In one of the greatest fraud schemes in US history, five people were convicted in April 2023 to jail terms ranging from six to forty years for their roles in a $1 billion biofuel tax scam.
From 2010 to 2018, the conspirators were involved in a variety of fraudulent operations, including money laundering, mail fraud, and claiming more than $1 billion in refundable renewable fuel tax credits. The scheme’s foundation was to generate the illusion of biodiesel production and sale in order to collect tax credits from the IRS.
