Crypto fund manager gets 37 months for tax evasion after renouncing citizenship

Schmidt also concealed foreign bank accounts, a violation of FBAR requirements. Failing to file FBARs can carry penalties of up to $100,000 per violation or 50% of the account balance, whichever is greater.

Even after giving up his passport, Schmidt kept doing business on US soil. In 2023, he purchased a property in Colorado for $5.8 million and flipped it for $9 million. That is a $3.2 million gain on a single transaction. He did not report the US-sourced income. Non-resident aliens are still subject to US tax on income effectively connected with a US trade or business, and real estate gains fall squarely in that category.

The Department of Justice made a point of emphasizing that expatriating does not insulate individuals from their US tax obligations. The DOJ specifically highlighted the cryptocurrency sector in its enforcement messaging around the Schmidt case.

The expatriation angle adds another layer. Filing false expatriation statements transforms what might be a legitimate tax planning strategy into a federal crime. For individual investors who have held crypto in foreign accounts and have not filed FBARs, the IRS has voluntary disclosure programs that, while expensive, are considerably cheaper than 37 months of your life.