TransLunar Crypto Fund Founder Sentenced to 37 Months in Tax Fraud Case

TL;DR:

• Justin Ryan Schmidt was sentenced to 37 months in prison and ordered to pay $3.4 million in tax restitution by a federal court in Austin, Texas.
• The executive reported annual income under $5,000 between 2020 and 2022, after earning more than $7 million from his investment fund.
• Schmidt renounced his US citizenship in March 2022 to relocate to the Cayman Islands and evade tax obligations on his assets.

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For a tax evasion scheme, a Federal Court sentenced Justin Ryan, founder of TransLunar Crypto Fund, to 37 months in prison. The ruling was made public last Monday by District Judge Robert Pitman in Austin, Texas, following Schmidt’s guilty plea. The judicial resolution additionally establishes the payment of approximately $3.4 million in restitution.

The Department of Justice reported that the executive concealed more than $7 million earned through managing the fund between 2019 and 2022. However, in the tax returns corresponding to the 2020, 2021, and 2022 fiscal years, Schmidt claimed to have recorded net income of less than $5,000 annually.

Investigation details and tax evasion

Schmidt launched TransLunar Crypto LP in 2017 to raise capital for projects linked to blockchain technology. Fund raising was primarily focused on investors in the cities of Austin and Aspen, according to defense documentation filed this month.

In March 2022, the manager formalized the renunciation of his US citizenship and established residency in the Cayman Islands. During this process, tax prosecution indicates that he submitted a net worth statement containing false data to the Internal Revenue Service (IRS).

Subsequently, in 2023, Schmidt purchased real estate in Snowmass Village, Colorado, for $5.8 million. The property was sold three months later for $9 million, a transaction in which prosecutors documented the submission of altered tax information to evade capital gains taxes.

“Renouncing US citizenship does not shield you from American justice,” Assistant Attorney General Colin M. McDonald declared in an official statement. Department of Justice representatives noted that the conduct constituted a deliberate attempt to hide millions in assets from the tax system.

Schmidt’s arrest took place on February 23 by agents from the IRS Criminal Investigation division. Since that date, the fund manager has remained in federal custody.

Prosecutors detailed in their July 22 sentencing memo that the defendant provided false information to the probation office following his arrest. At that time, Schmidt stated he was single and reported a negative net worth of $1.1 million.

The judicial proceeding report confirms that Schmidt is married to a British citizen residing in the Cayman Islands. Following the IRS investigation, the defense admitted that the defendant’s actual net worth amounts to at least $5.8 million.

The execution of the sentence and the payment of the $3.4 million ordered by Judge Pitman will mark the conclusion of the criminal proceedings initiated earlier this year.