Pennsylvania Man Pleads Guilty to Tax Evasion Linked to $13 Million in NFT Sales

Pennsylvania Man Faces Serious Charges for Tax Fraud Involving NFTs

In April 2025, Waylon Wilcox, a 45-year-old resident of Pennsylvania, admitted guilt in a federal court regarding two counts of submitting false tax returns. He concealed substantial income derived from non-fungible token (NFT) transactions, amounting to millions of dollars. According to court filings, Wilcox significantly underreported his earnings for the year 2021 by approximately $8.5 million, leading to an evasion of around $2.1 million in taxes. For the subsequent tax year, 2022, he underreported his income by about $4.6 million, resulting in an additional tax liability of roughly $1.1 million.

The majority of Wilcox’s undisclosed income stemmed from trading CryptoPunk NFTs, known as “Punks.” He sold 62 Punks in 2021 and 35 in 2022. In his tax filings for both years, he falsely claimed he had no involvement in digital assets or virtual currencies by answering “no” to relevant inquiries. The Internal Revenue Service (IRS) later scrutinized his tax returns, escalating the matter to the Criminal Investigation division. Ultimately, Wilcox confessed to the inaccuracies in his tax submissions.

The Tax Implications of NFTs in the U.S.

Under U.S. tax regulations, individuals are obligated to report any income generated from the sale of NFTs. The penalties for such offenses can include a prison sentence of up to six years, a period of supervised release following incarceration, and substantial fines.

NFTs and Their Market Value

CryptoPunks represent a specific category of NFTs. Each NFT serves as a unique digital asset, functioning as a verifiable certificate of ownership recorded on a blockchain, allowing for buying and selling. While transactions can occur in cash, cryptocurrency remains the predominant payment method.

Each “Punk” is a digital artwork crafted from thousands of artistic elements. Although two Punks may appear similar, they are not interchangeable due to their unique blockchain records. During the NFT boom of 2021 and 2022, these digital assets were highly coveted, with prices nearing $480,000 each. However, by mid-2025, their value plummeted by approximately 80%, trading around $99,300 each. In early 2025, one collector suffered a loss of nearly $10 million while attempting to sell his CryptoPunk collection.

Taxation of NFTs in Canada and the Risks of Tax Evasion

In Canada, individuals must report income from NFT sales and other digital assets as stipulated by the Income Tax Act (ITA). The ITA categorizes various income sources, including employment income, business income, investment income, and capital gains, each subject to different tax regulations.

Both business and investment income are fully taxable in Canada, while only half of capital gains are included in taxable income. Consequently, proceeds from NFT sales must be accurately reported and included in the taxpayer’s overall income.

Failure to comply can result in a prison sentence of up to five years and fines reaching 200% of the total taxes owed. In cases where tax evasion involves sophisticated schemes, international elements, or connections to money laundering or terrorism financing, individuals may face fraud charges under the Criminal Code, which can lead to sentences of up to 14 years.

Important Tax Advice: Reporting NFT Income

Taxpayers are required to disclose income from NFT sales and other digital assets. The consequences of tax evasion are severe, potentially leading to imprisonment and hefty fines. Therefore, it is crucial to maintain accurate records of all NFT transactions and report them accordingly. If you have not done so, it is advisable to consult with a qualified tax attorney in Canada for guidance on addressing your situation.

Frequently Asked Questions

How Do Tax Authorities Detect Evasion in Digital Assets?

Tax agencies, including the Canada Revenue Agency (CRA) and the Internal Revenue Service (IRS), work collaboratively with other international tax authorities to share information related to tax enforcement.

Additionally, these agencies utilize artificial intelligence (AI) to analyze vast amounts of data, identifying trends and irregularities. Many digital asset transactions are recorded on publicly accessible blockchains, enabling authorities to verify information when necessary.

Taxpayers are strongly encouraged to report their income accurately and seek advice from experienced tax professionals if they have any uncertainties.

What Should I Do If I Accidentally Underreported My Income?

Mistakenly underreporting income does not automatically result in criminal charges. If there has been an error or omission in previous tax returns, taxpayers can take advantage of the voluntary disclosure program (VDP) offered by the CRA.

Eligibility for the VDP comes with specific conditions, and it is advisable for taxpayers to consult with knowledgeable tax lawyers to determine their eligibility and assist in preparing the VDP application if applicable.

This article serves as a general overview of the subject matter. For specific circumstances, professional advice should be sought.

Disclaimer: This article is provided for informational purposes only and does not constitute financial advice. Readers are encouraged to conduct their own research before making any investment decisions.