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IRS Targets NFT Trader: Pennsylvania Man Faces Charges for Millions in Undisclosed Earnings

A Pennsylvania man has pleaded guilty to federal charges after failing to report millions in earnings from his non-fungible token (NFT) transactions to the IRS.

Waylon Wilcox, 45, admitted to underreporting more than $13 million in income in his tax returns for 2021 and 2022, primarily from trading 97 CryptoPunks.

Prosecutors allege he sold 62 CryptoPunks in 2021, netting approximately $7.4 million and another $4.9 million from 35 sales in 2022.

Wilcox filed false tax returns that significantly reduced his tax liability, avoiding over $3.2 million in taxes combined for both years.

He answered “no” to questions about digital asset trading on his returns, which led to the investigation by the IRS Criminal Investigation Division.

IRS officials stress that gains from NFT transactions are taxable and must be reported accurately to maintain public confidence in the tax system.

Now facing up to six years in prison, Wilcox’s sentencing will be determined based on federal guidelines.

This case surfaces amidst a noticeable downturn in the NFT market, with trading volume plummeting 24% in the first quarter of 2025 compared to the last quarter.

Despite a slight recovery in annual sales surpassing $8.83 billion in 2024, the NFT market remains significantly lower than its peak in 2021 when sales reached $15.7 billion.

This situation serves as a crucial reminder to NFT traders about the importance of compliance with IRS regulations and the tax obligations tied to crypto assets.