Hedge Fund Manager Pleads Guilty to Tax Evasion in Austin

AUSTIN, Texas – A Cayman national who renounced his U.S. citizenship pleaded guilty today to evading payment of more than $1.5 million of federal income tax liabilities.

According to court documents and statements made in court, Justin Ryan Schmidt, formerly of Austin, managed a hedge fund focusing on cryptocurrency investments. Between 2020 and March 2022, Schmidt earned a total of more than $6 million from his hedge fund but did not report any of this income on his 2020, 2021 or 2022 tax returns. Instead, Schmidt falsely reported earning income of $5,000 or less during each of those years. At the same time, he held millions of dollars in foreign bank accounts that he failed to disclose to the IRS.

In November 2021, Schmidt became a British citizen. He renounced his U.S. citizenship in March 2022. Individuals who expatriate from the United States are required to report certain information to the IRS about their net worth, income, assets, and liabilities as of the date of their expatriation. Schmidt willfully filed a false expatriation statement reporting that his net worth was $25,000 at the time of expatriation, when in fact it exceeded $2 million, and stating that he had complied with his tax obligations for the preceding five years when he knew that he had not.

In 2023, Schmidt paid approximately $5.8 million to purchase real property in Snowmass Village, Colorado, and sold the property a few months later for approximately $9 million. Schmidt had a duty to report his U.S. sourced income, but did not report the gains from this sale and evaded payment of taxes by submitting false documents to prevent taxes from being withheld on the sale.

Schmidt pleaded guilty to one count of tax evasion. His sentencing will be scheduled at a later date.  He faces a maximum penalty of five years in prison, as well as restitution and monetary penalties. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

IRS Criminal Investigation is investigating the case.

Senior Litigation Counsel Michael C. Boteler and Trial Attorney Michael Jones of the Criminal Division are prosecuting the case. Assistant U.S. Attorney Doug Gardner assisted at the hearing.

On April 7, the Department of Justice announce the creation of the National Fraud Enforcement Division. The core mission of the Fraud Division is to zealously investigate and prosecute those who steal or fraudulently misuse taxpayer dollars.  Department of Justice efforts to combat fraud support President Trump’s Task Force to Eliminate Fraud, a whole-of-government effort chaired by Vice President J.D. Vance to eliminate fraud, waste, and abuse within Federal benefit programs.

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