Justin Ryan Schmidt, co-founder of cryptocurrency-focused hedge fund Translunar Crypto LP, has been sentenced to 37 months in prison after admitting to a scheme to evade millions of dollars in US taxes following his renunciation of US citizenship, according to a report by Bloomberg.
Schmidt, 46, was sentenced in federal court in Austin, Texas, after pleading guilty earlier this year. US prosecutors said he deliberately underreported his income for the 2020, 2021 and 2022 tax years, claiming earnings of less than $5,000 despite generating more than $7m through his hedge fund between 2019 and 2022.
According to the US Department of Justice, Schmidt renounced his US citizenship in March 2022 and relocated to the Cayman Islands. As part of the expatriation process, he allegedly submitted a false declaration of his net worth in an effort to reduce his tax liabilities.
Prosecutors also accused Schmidt of concealing taxable gains from a high-value property transaction. In 2023, he purchased a home in Snowmass Village, Colorado, for $5.8m before selling it three months later for $9m. Authorities said he provided false documentation to avoid paying taxes on the profit from the sale.
Announcing the sentence, the Department of Justice said renouncing US citizenship does not exempt former citizens from US tax laws or criminal prosecution where offences have been committed.
In addition to the prison term, US District Judge Robert Pitman ordered Schmidt to pay approximately $3.4m in restitution.
Schmidt established Translunar Crypto LP in 2017, raising capital primarily from investors in Austin, Texas, and Aspen, Colorado, to invest in blockchain and digital asset businesses.
He has remained in custody since his arrest by IRS Criminal Investigation agents in February.
Court filings submitted by prosecutors ahead of sentencing also alleged that Schmidt continued to misrepresent his financial circumstances after his arrest. While he initially claimed to probation officers that he was single and had a negative net worth of around $1.1m, prosecutors said he is married to a British citizen living in the Cayman Islands and has since acknowledged a net worth of at least $5.8m.
