AUSTIN, Texas, a former Austin hedge fund manager who rode the cryptocurrency wave, is now facing a hard time over old-school tax trouble. Justin Ryan Schmidt has pleaded guilty in federal court to a single count of tax evasion after prosecutors said he hid more than $1.5 million in tax liability. He ran a crypto-focused hedge fund, allegedly underreported what he was making, and shuffled money through foreign accounts. He now faces up to five years in prison and has not yet been sentenced.
What Prosecutors Say Went Wrong
According to a U.S. Department of Justice press release, court documents say Schmidt pulled in more than $6 million from his fund between 2020 and March 2022. On paper, though, he allegedly told the IRS he made $5,000 or less on his tax returns, all while holding millions in undisclosed foreign bank accounts.
Prosecutors say the paper trail did not stop there. Schmidt became a British citizen in November 2021 and renounced his U.S. citizenship in March 2022. As part of that process, he filed an expatriation statement that, according to the Justice Department, claimed his net worth was just $25,000 when it actually exceeded $2 million.
He is also accused of making a tidy profit on a luxury getaway. Prosecutors allege that in 2023 Schmidt bought a property in Snowmass Village, Colorado, for about $5.8 million and sold it only months later for roughly $9 million, failing to report an estimated $3.2 million gain.
Guilty Plea And What Comes Next
Schmidt has now pleaded guilty to one count of tax evasion and faces a statutory maximum of five years in prison, according to CBS Austin. The outlet reports that a sentencing date has not yet been set, and that IRS Criminal Investigation is leading the probe.
Before the plea, Schmidt had been indicted on related counts that accused him of filing false tax returns and failing to disclose foreign bank accounts, according to the station. Those additional charges are not part of the guilty plea but helped set the stage for the government’s case.
Potential Federal Penalties Still Loom
The earlier indictment outlined potential charges for filing false tax forms and willfully failing to file reports on foreign bank accounts. Each of those carries its own possible prison time if pursued at trial. Tax evasion alone has a maximum sentence of five years in prison, while filing false returns can bring up to three years, and willful failures to file foreign account reports can bring up to five years, according to the U.S. Department of Justice.
At the indictment stage, federal prosecutors also emphasized that an indictment is merely an allegation and that defendants are presumed innocent until proven guilty in court. Schmidt’s guilty plea resolves that question on the tax evasion count, but his sentence and any financial penalties remain to be determined.
Texas Tax Crackdown Context
The case lands amid a broader push by federal prosecutors in the Western District of Texas to go after tax crimes across the region, especially involving offshore assets and expatriation reporting. Earlier this month, the San Antonio Express-News reported that a repeat tax evader from San Antonio was sentenced to 37 months in prison, a reminder that judges in the district are taking these cases seriously.
For Schmidt, the next big date will be his sentencing hearing, where a judge will decide how much of that five-year maximum he actually serves and whether he will owe restitution or forfeit any assets tied to the misconduct prosecutors have outlined.
