How the IRS Fights Crypto Scams

Just when it seems that crypto scams are getting away with their shenanigans, another means of uncovering these cybercriminals comes to light. The IRS is also nabbing crypto criminals for tax evasion. 

Tax evasion is, of course, a serious offense. The charge hasn’t been mentioned much in relation to cryptocurrency, not because income from digital currencies isn’t taxable but because of the relative newness of crypto coins. However, the IRS has made it absolutely clear that gains from digital currencies should be declared as taxable income and that there are significant penalties for failure to be transparent about crypto earnings. 

The anonymity of the blockchain and the lack of regulations applied to cryptocurrency up until now have allowed crypto scams to channel their ill-gotten gains. However, that is changing, thanks to improved crypto investigation technology and forensics techniques that identify persons of interest behind crypto scams. 

How “Accountants with Guns” Battle Crypto Scams

The IRS-CI plays a key role in nabbing these crypto criminals. Although tax law doesn’t usually sound that exciting, the IRS-CI is almost like something out of the movies. This unit is often known as “accountants with guns.” The Wall Street Journal interviewed Thomas Fatturoso, a special agent in the IRS-CI, who says the pressure is on the organization to step up efforts to find tax revenue lost on the blockchain. 

The Biden Administration is expecting the IRS-CI to rise to the challenge of recovering billions that are owed to the government in taxes. This means tracking down hardened criminals holding anonymous bitcoin wallets with funds stolen from their victims. It also means approaching people who didn’t realize that cryptocurrency gains were taxable. 

Ignorance of the law is not an excuse in this case, although the IRS-CI will naturally deal more harshly with those who intentionally break the law and set out to defraud people with crypto scams.

It’s often noted that, despite overseeing many murders and other crimes, Al Capone was finally put in prison for tax evasion. Avoidance of taxes, while it may seem less dramatic than other types of cybercrime, is often what gets fraudsters in the end. 

From a psychological standpoint, this makes sense. Crypto scammers are so busy running their operations that bookkeeping is the last thing on their minds. They often engage in criminal activity because of thrill-seeking impulses and a lack of respect for the law. If they’ve gotten away with stealing from so many gullible people, why worry about the authorities? 

However, the IRS isn’t the same as some inexperienced trader or someone who is desperate to make a buck on the internet. As the IRS builds out its crypto investigation capabilities, we’re sure to see more crypto scams falling into the IRS’ trap, and not a moment too soon.

Have You Lost Money to a Broker or Crypto Scam? Talk to Us?

Broker Dispute professionals are the people to contact if you suspect you’re dealing with a scam broker or another type of fraud. We have the expertise and the technical solution to unmask information about crypto scams. We will launch an investigation and create a report that will boost your claim and assist you with fund recovery.