IRS Criminal Chief Confirms Building 'Hundreds' Of Crypto-Related Cases

The criminal investigation division of the United States Internal Revenue Service (IRS) confirmed that it is building "hundreds" of cryptocurrency-related cases for the upcoming tax season and would make them public soon.

The cases, according to IRS Criminal Investigation division chief Jim Lee, are no longer mostly made up of money laundering but includes tax cases too, he told Bloomberg Tax. The crypto-related cases now involve off-ramping transactions and people getting paid in crypto but not reporting them.

Off-ramping is a term used for the act of exchanging digital assets for fiat currency. Lee revealed that unlike in the past, the IRS can now trace cryptocurrency transactions but when asked to give further details on this, he declined to elaborate.

Last year, the IRS created the Office of the Cyber and Forensic Services which leads investigations on cryptocurrency, digital assets and cybercrimes. Lee also shared that following the money is not a new thing at the IRS and that the team has already pivoted into new realms, including Web 3.

The IRS embraced the broader "Digital Assets" category ahead of the tax season, where it grouped cryptocurrencies, non-fungible tokens (NFTs) and stablecoins under one cluster. "We've been doing it for more than 100 years, and we've followed criminals into the dark web and now into the metaverse," the division chief said.

The criminal division has seized around $7 billion in crypto for the fiscal year 2022, which is twice the amount it got last year. Meanwhile, in a report released by the IRS last week, special agents of the division spent almost 70% of their time looking into tax-related crimes like tax evasion while, 30% spent on drug trafficking and money laundering cases.

It also highlights the number of successful cryptocurrency cases, including the tax evasion sentencing of Bitqyck founders Bruce Bise and Samuel Mendez. The report also listed the arrest of Ilya Lichtenstein and his wife, Heather Morgan, for their alleged involvement in conspiring to launder crypto stolen from the 2016 Bitfinex hack.

With the cryptocurrency going mainstream and malicious actors growing exponentially, launching myriad of attacks to steal funds, government agencies and regulators have started to react and implement solutions to ensure they enforce the rule of law.