Founder of crypto fund Translunar gets 37 months in tax case

Justin Ryan Schmidt, a founder of a hedge fund focused on cryptocurrency investments, was sentenced to 37 months in prison for evading taxes after renouncing his U.S. citizenship, U.S. authorities said. 

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Schmidt, 46, was sentenced Monday in federal court in Austin, Texas, where he pleaded guilty this year. Schmidt, who ran Translunar Crypto LP, falsely reported earning income of less than $5,000 in 2020, 2021 and 2022. He actually earned more than $7 million from his hedge fund from 2019 to 2022, prosecutors said in court papers.

He gave up his U.S. citizenship in March 2022 and expatriated to the Cayman Islands, filing a false tax return on his net worth at that time, according to the Justice Department. In 2023, Schmidt bought a property in Snowmass Village, Colorado, for $5.8 million and sold it three months later for $9 million but submitted false documents to avoid paying taxes on the sale, the U.S. said. 

“Renouncing U.S. citizenship does not shield you from American justice,” Assistant Attorney General Colin M. McDonald said in a statement. “Mr. Schmidt deliberately hid millions in income and assets from the IRS, filed false statements, and cheated America’s tax system.”

Lawyers for Schmidt didn’t immediately respond to a request for comment. 

U.S. District Judge Robert Pitman also ordered Schmidt to pay about $3.4 million in restitution, according to the statement. 

Schmidt launched Translunar in 2017 to invest in blockchain startups. He raised money primarily from investors in Austin, Texas, where he lived, and Aspen, Colorado, according to a sentencing memo filed by defense lawyers this month. 

Schmidt has been in custody since he was arrested on Feb. 23 by agents of the Internal Revenue Service Criminal Investigations division.

In their July 22 sentencing memo, prosecutors said that after his arrest, Schmidt told the probation office that he was single and he had a negative net worth of $1.1 million. In reality, Schmidt is married to a British citizen who lives in the Cayman Islands, and he now admits his net worth is at least $5.8 million, prosecutors wrote.

The case is U.S. v. Schmidt, 26-cr-94, U.S. District Court, Western District of Texas (Austin).