Cayman resident sentenced to 37 months for hiding $7 million from IRS

Justin Ryan Schmidt, a Cayman resident formerly of Austin, Texas, was sentenced to 37 months in prison for tax evasion after renouncing his U.S. citizenship and making false statements about his finances and tax compliance, the Justice Department said.

Schmidt managed a cryptocurrency-focused hedge fund and earned at least $7 million over several years, prosecutors said, but he did not report any of that income on his 2020, 2021 or 2022 tax returns. Instead, according to court documents and statements made in court, he falsely reported earning $5,000 or less during each of those years while holding millions of dollars in foreign bank accounts that he failed to disclose to the IRS.

When Schmidt renounced his citizenship in March 2022, he was required to report certain information to the IRS about his net worth, income, assets and liabilities as of the expatriation date, prosecutors said. Court documents state that Schmidt falsely reported a net worth of $25,000 despite knowing that his actual net worth exceeded $2 million. He also falsely stated that he had complied with his tax obligations for the preceding five years.

Prosecutors said Schmidt continued to evade U.S. taxes after expatriating. In 2023, he purchased a house in Snowmass Village, Colorado, for approximately $5.8 million and sold it three months later for approximately $9 million, according to court documents. Although he was required to report his U.S.-source income, Schmidt did not report the gains from the sale and submitted false documents to prevent taxes from being withheld, prosecutors said.

“Today’s sentence makes clear that renouncing U.S. citizenship does not shield you from American justice,” Assistant Attorney General Colin M. McDonald of the Justice Department’s National Fraud Enforcement Division said in a statement. McDonald said Schmidt “deliberately hid millions in income and assets from the IRS, filed false statements, and cheated America’s tax system.”

IRS Criminal Investigation Special Agent in Charge Christopher J. Altemus Jr. of the Texas Field Office said Schmidt “benefited from being a U.S. citizen but didn’t want to pay the taxes to reap the benefits.” Altemus added that IRS criminal investigators are not limited by national borders and that Schmidt “didn’t leave our sight.”

U.S. District Judge Robert Pitman for the Western District of Texas, who imposed the sentence, also ordered Schmidt to serve three years of supervised release and pay approximately $3.4 million in restitution to the United States.

McDonald and U.S. Attorney Justin R. Simmons for the Western District of Texas announced the case, which was investigated by IRS-CI. Senior Litigation Counsel Michael C. Boteler and Trial Attorney Michael Jones of the Criminal Division prosecuted the case with assistance from Assistant U.S. Attorney Doug Gardner for the Western District of Texas.