A federal judge handed Justin Ryan Schmidt a 37-month prison sentence for tax evasion after he gave up his U.S. citizenship. He reported under $5,000 in annual income while actually earning over $7 million from his fund between 2019 and 2022. A federal judge ordered him to pay roughly $3.4 million in restitution, and he has been in custody since his February 23 arrest.
Schmidt operated Translunar Crypto LP, a hedge fund that invested in blockchain startups. Schmidt gave up his U.S. citizenship in March 2022 and moved to the Cayman Islands. At that time, he submitted a fraudulent tax return that misrepresented his net worth, according to the Justice Department. The following year, Schmidt acquired a residence in Snowmass Village, Colorado, costing $5.8 million, and resold it after only three months for $9 million, but he submitted false documents to sidestep taxes on the sale, prosecutors said.
"Renouncing US citizenship does not shield you from American justice," Assistant Attorney General Colin M. McDonald stated. "Mr. Schmidt deliberately hid millions in income and assets from the IRS, filed false statements, and cheated America's tax system."
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Schmidt launched Translunar in 2017 to support early-stage blockchain firms, drawing most of its funds from backers in Austin, Texas (his residence then) and Aspen, Colorado, per a defense sentencing memo filed this month.
Prosecutors noted in a July 22 filing that following his arrest, Schmidt claimed to the probation office that he was unmarried and had a net worth of negative $1.1 million. Prosecutors revealed that Schmidt is actually married to a British citizen who resides in the Cayman Islands, and he currently acknowledges his net worth is more than $5.8 million.
This case underscores that giving up U.S. citizenship does not eliminate one's duty to pay taxes. It also highlights the IRS's increasing focus on cryptocurrency-related financial crimes, as digital asset transactions often leave a traceable trail that investigators can follow even after individuals relocate abroad. Authorities emphasized that attempts to hide income and flee the country will not escape prosecution.
The IRS's investigation into Schmidt began with a routine review of cryptocurrency transactions, which flagged discrepancies between his reported income and his actual crypto holdings. Agents used forensic accounting and blockchain analysis to trace his digital asset movements across multiple wallets and accounts, uncovering the true scale of his earnings. The sentencing reinforces the government's determination to pursue tax evaders regardless of their location or legal status.
After relocating to the Cayman Islands, he continued to manage assets and engage in property deals in the United States, which ultimately drew scrutiny from tax authorities. The IRS employed forensic accounting and blockchain analysis to link his offshore holdings to his underreported income, showing that digital ledgers can expose financial misconduct across borders.
The docket number is US v. Schmidt, case 26-cr-94, in the Western District of Texas (Austin).
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