Crypto hedge fund manager gets 37 months in prison for tax evasion after renouncing US citizenship

Here’s a move that looked clever on paper: earn millions running a crypto hedge fund, renounce your US citizenship, tell the government you’re worth $25,000, and walk away clean. Justin Ryan Schmidt tried exactly that. It did not work. Schmidt, a former hedge fund manager based in Austin, Texas, was sentenced to 37 months in federal prison on July 27 for tax evasion. The case is one of the most pointed examples yet of US authorities cracking down on crypto operators who think expatriation is a get-out-of-taxes-free card. The scheme that unraveled Schmidt managed Translunar Crypto LP, a hedge fund that, as the name suggests, was firmly in the digital asset space. Between 2020 and his expatriation in March 2022, he earned at least $6 to $7 million in unreported income from the fund. When he renounced his US citizenship on March 3, 2022, he submitted DS-4080 and DS-4083 forms, the official expatriation paperwork, claiming a net worth of just $25,000. The false filings were designed to dodge the so-called “exit tax,” which requires departing citizens to settle up with the IRS on unrealized gains and outstanding obligations before they leave. Schmidt also concealed foreign bank accounts...