Atlanta Internet Entrepreneur Convicted Of Hiding Income And Assets In Swiss Bank Account
ATLANTA – Gregg A. Kaminsky has pleaded guilty to one count of wilfully failing to file a Foreign Bank Account Report with the U.S. Department of Treasury in connection with his concealment of income and assets in accounts in Switzerland, Hong Kong, and Thailand over several years, as well as his failure to report certain income earned in the virtual world, “Second Life.”
“This prosecution is a yet another reminder that the days of Americans hiding income and assets overseas are over,” said United States Attorney Sally Quillian Yates. “It also sends a strong message that U.S. taxpayers are required to report all of their taxable income to the IRS, whether that income is earned in the real world or in a virtual world.”
“U.S. citizens who seek to avoid their tax obligations by hiding income in undeclared bank accounts abroad should by now be fully on notice that they will be held accountable for their actions, both civilly and criminally,” stated IRS Criminal Investigation Special Agent in Charge, Veronica F. Hyman-Pillot. “Americans who file accurate, honest and timely returns can be assured that the government will hold accountable those who don’t.”
According to United States Attorney Yates, the charges and other information presented in court: Citizens and residents of the United States who have a financial interest in, or signature authority over, a financial account in a foreign country with an aggregate value of more than $10,000 at any time during a calendar year are required to file with the U.S. Department of Treasury a “Report of Foreign Bank and Financial Accounts,” commonly referred to as the “FBAR.” The FBAR for the applicable year must be filed by June 30 of the following year.
Kaminsky is an Internet entrepreneur who serves as the Chief Executive Officer of Circlenet LLC, based in Atlanta, Ga. From 2000 through 2008, Kaminsky owned and controlled a foreign bank account with Union Bank of Switzerland AG (“UBS”), one of the biggest banks in Switzerland and largest wealth managers in the world. By 2006, Kaminsky’s UBS account held approximately $1.1 million. From time to time between 2002 and 2009, Kaminsky caused funds to be wire-transferred from his UBS account in Switzerland to other foreign bank accounts controlled by him in Thailand and Hong Kong. Also during that time, Kaminsky caused his income from at least two different U.S. companies to be direct-deposited into his UBS account in Switzerland.
Yet, over this period, Kaminsky did not disclose his UBS account or other foreign financial accounts to the U. S. Treasury Department as required, and thereby concealed several hundred thousand dollars in taxable income, interest, and dividends from the U.S. Internal Revenue Service (IRS).
In addition, in 2007 and 2008, Kaminsky omitted his UBS account and associated income from Free Applications for Federal Student Aid (FASFA) that he electronically filed with the U.S. Department of Education in order to qualify for need-based federal financial aid assistance to fund his tuition for an Executive MBA program at Emory University. At the time of the FASFA applications, Kaminsky controlled over a half million dollars in his UBS account, which would have made him ineligible for federal student loan assistance.
On June 30, 2008, the U.S. Department of Justice sought court approval to compel UBS to disclose the identities of U.S. accountholders who may be using UBS accounts to hide assets overseas and thereby evade U.S. taxes. The request and the order authorizing it were widely reported by the media throughout the United States, which coverage continued throughout 2008 and 2009 as the U.S., UBS, and Switzerland negotiated a resolution and UBS began disclosing U.S. account holders to the IRS.
Following this news, Kaminsky closed his UBS account and transferred the balance of his UBS account to an account that he controlled at HSBC Bank in Hong Kong. Further, in spring 2010, Kaminsky filed FBARs for his Swiss and Hong Kong accounts for the very first time, also filing amended individual income tax returns for 2007 and 2008 that disclosed the previously unreported income in his UBS account. However, in his amended 2007 and 2008 returns, and in his subsequently filed returns for 2009 through 2011, Kaminsky still failed to report nearly $150,000 in taxable income earned from his business activities in the virtual world, “Second Life.”
Participants in Second Life, referred to as “residents,” can engage in a wide variety of business activities, including buying, renting, and sub-leasing virtual land and buying and selling other virtual goods, services, and experiences for their “avatars.” Transactions are conducted using a virtual currency, “Linden Dollars.” Linden Dollars can be bought and traded on the “Linden Exchange,” and are redeemable for cash.
Including his virtual world income, Kaminsky failed to report over $400,000 in income to the IRS between 2000 and 2012, resulting in a loss to the IRS of over $100,000.
Kaminsky, 46, of Atlanta, Ga., faces a maximum sentence of five years in prison and a criminal fine of up to $250,000. In addition, as part of his plea agreement with the United States, Kaminsky has agreed to pay a civil penalty to the IRS in the amount of $250,635.20, which is equivalent to fifty percent of the value of the balance in Kaminsky’s HSBC account in Hong Kong as of June 30, 2009.
Sentencing is scheduled for March 4, 2015 at 10:00 a.m. before Senior United States District Judge Willis B. Hunt.
This case is being investigated by Special Agents of the Criminal Investigation division of the U.S. Internal Revenue Service. Valuable assistance has also been provided by Special Agents of the U.S. Department of Education, Office of Inspector General.
Assistant United States Attorney David M. Chaiken is prosecuting the case.
For further information please contact the U.S. Attorney’s Public Affairs Office at USAGAN.PressEmails@usdoj.gov or (404) 581-6016. The Internet address for the home page for the U.S. Attorney’s Office for the Northern District of Georgia Atlanta Division is http://www.justice.gov/usao/gan/.