In what is presented as the first US criminal case involving bitcoin (BTC) that has a tax component, a software engineer was sentenced to nine years of prison for 18 federal felonies related to his scheme to defraud software giant Microsoft, his former employer, of more than USD 10m.
The convict used a bitcoin mixing service with the aim to hide the source of the funds ultimately passing into his bank account, the US Department of Justice said in a statement.
The sentence was issued by a US District Court in Seattle after a jury convicted Volodymyr Kvashuk, a 26-year-old Ukrainian citizen who first worked as a contractor at Microsoft and then was the company’s employee from August 2016 until he was fired in June 2018. Kvashuk was found guilty of “five counts of wire fraud, six counts of money laundering, two counts of aggravated identity theft, two counts of filing false tax returns, and one count each of mail fraud, access device fraud, and access to a protected computer in furtherance of fraud,” the statement said.
The software engineer was involved in the testing of Microsoft’s online retail sales platform, and used his access to steal currency stored value (CSV) such as digital gift cards. He then resold the CSV online, transferring USD 2.8m worth of BTC to his bank and investment accounts over a period of seven months.
“Kvashuk then filed fake tax return forms, claiming the bitcoin had been a gift from a relative,” according to the DoJ.
Among others, the convict used the proceeds from his criminal activities to buy a USD 160,000 Tesla vehicle, and a USD 1.6m lakefront house.
Commenting on the cryptocurrency tax-related dimension of the case, Ryan L. Korner, a special agent at the Internal Revenue Service’s Criminal Investigations branch who was in charge of the case, said that the “sentencing proves you cannot steal money via the Internet and think that Bitcoin is going to hide your criminal behaviors. Our complex team of cybercrimes experts with the assistance of IRS-CI’s Cyber Crimes Unit will hunt you down and hold you accountable for your wrongdoings.”