A man from Pennsylvania has admitted guilt to federal charges after neglecting to disclose millions of dollars in profits accrued from non-fungible token trading.
In a press announcement dated April 11, the United States Attorney’s Office for the Middle District of Pennsylvania reported that Waylon Wilcox, 45, confessed to submitting inaccurate tax returns for the years 2021 and 2022, failing to report over $13 million in earnings from NFT transactions.
The majority of these unreported profits stemmed from the buying and selling of 97 items from the renowned CryptoPunks collection.
Prosecutors allege that Wilcox filed a misleading return in April 2022, stating a considerably lower income for 2021 than what he actually earned. This action reduced his tax obligation by more than $2.1 million. He repeated this tactic in October 2023 for his 2022 tax return, evading an additional $1.1 million in taxes.
Overall, Wilcox underreported approximately $8.5 million in 2021 and an additional $4.6 million in 2022. He incorrectly responded “no” when prompted on both returns about whether he had engaged in digital asset trading.
According to federal investigators, Wilcox generated around $7.4 million from 62 CryptoPunks sales in 2021 and another $4.9 million from selling 35 Punks in 2022.
The IRS, alongside its Criminal Investigation Division, conducted the investigation. The announcement emphasized that taxpayers are required to report any profits or losses from NFT transactions as part of their taxable income.
“Given the current economic climate, it is increasingly vital that the American public trusts that everyone is adhering to the rules and fulfilling their tax obligations,” stated Yury Kruty, Special Agent in Charge of the Philadelphia Field Office.
Wilcox may face a maximum sentence of up to six years in prison, along with supervised release and potential fines. A judge will determine his ultimate penalty based on federal sentencing laws and guidelines.
Decline in NFT Sales
Wilcox’s situation arises during a time when the NFT market is experiencing significant strain, with weekly sales volumes declining. Recent reports indicated that NFT sales fell by 4.7% last week to $94.7 million, continuing a downturn from the previous week’s $102.8 million.
Market activity has also tapered off, with both NFT buyers and sellers dropping over 75%, and trading volume in Q1 2025 decreased by 24% compared to the prior quarter, as noted by DappRadar.
Even high-profile collections such as CryptoPunks are feeling the effects. Recently, CryptoPunk #3100, one of the rare Alien Punks, was sold at a staggering $10 million loss, with the collection’s floor price plummeting by 67% from its peak in 2021.