A significant case involving NFT tax fraud has emerged, as a Pennsylvania man admitted guilt in federal court for concealing millions in profits derived from trading non-fungible tokens.
Waylon Wilcox, 45, pleaded guilty to filing fraudulent tax returns for the years 2021 and 2022, according to an April 11 announcement from the U.S. Attorney’s Office for the Middle District of Pennsylvania. He failed to declare over $13 million in income generated primarily through the buying and selling of high-value digital collectibles.
The bulk of these unreported earnings stemmed from transactions involving 97 items from the well-known CryptoPunks collection. Prosecutors revealed Wilcox submitted a false return in April 2022 for the 2021 tax year, reporting substantially less income than earned, thereby reducing his tax liability by more than $2.1 million.
He repeated this tactic in October 2023 for the 2022 tax year, evading an additional $1.1 million in taxes owed. Across the two years, Wilcox neglected to report approximately $8.5 million for 2021 and another $4.6 million for 2022.
Critically, on both returns, Wilcox falsely answered “no” when asked directly about transactions involving digital assets. Federal authorities detailed that his unreported gains included roughly $7.4 million from selling 62 CryptoPunks in 2021 and $4.9 million from 35 Punk sales in 2022.
The investigation was spearheaded by the Internal Revenue Service (IRS) and its Criminal Investigation Division. This case underscores the legal requirement for taxpayers to report all capital gains and losses from NFT sales as taxable income. Tax authorities globally are increasing scrutiny on crypto and digital asset transactions.
“In today’s economic environment, it’s more important than ever that the American people feel confident that everyone is playing by the rules and paying the taxes they owe,” stated Philadelphia Field Office Special Agent in Charge Yury Kruty, emphasizing the importance of tax compliance.
Wilcox now faces a potential maximum sentence of six years imprisonment, potentially followed by supervised release and financial penalties. The final sentence will be determined by a judge based on federal guidelines.
NFT Market Faces Headwinds
This high-profile fraud case surfaces amidst a cooling NFT market experiencing declining weekly sales volumes. Market data indicates that overall NFT sales volume recently dipped 4.7% week-over-week to $94.7 million, continuing a slide from $102.8 million the prior week.
Market activity has also significantly decreased, with the number of NFT buyers and sellers plummeting by over 75% each. Furthermore, trading volume in the first quarter of 2025 saw a 24% drop compared to the previous quarter, according to DappRadar.
Even premier collections like CryptoPunks are impacted by the downturn. Recently, a rare ‘Alien’ CryptoPunk (#3100) was sold, resulting in a staggering $10 million loss for the seller, highlighting the volatility and price corrections within the space. At that time, the collection’s floor price had fallen 67% from its 2021 peak.