A Cayman resident who renounced his U.S. citizenship has been sentenced to 37 months in prison for tax evasion.

According to court documents and statements made in court, Justin Ryan Schmidt, formerly of Austin, managed a hedge fund focused on cryptocurrency investments. Over a period of several years, Schmidt earned a total of at least US $7 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 US $5,000 or less during each of those years. At the same time, he held millions in US dollars in foreign bank accounts that he failed to disclose to the IRS.

“Today’s sentence makes clear that renouncing U.S. citizenship does not shield you from American justice,” said Assistant Attorney General Colin M. McDonald of the Justice Department’s National Fraud Enforcement Division. “Mr. Schmidt deliberately hid millions in income and assets from the IRS, filed false statements, and cheated America’s tax system. Despite his best efforts to evade the reach of the Justice Department, Mr. Schmidt will now begin to reap the true reward of his crimes.”

Schmidt 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 filed a false expatriation statement reporting that his net worth was $25,000, knowing that his net worth at the time exceeded $2 million. He also falsely stated that he had complied with his tax obligations for the preceding five years.

“Schmidt benefited from being a U.S. citizen but did not want to pay the taxes to reap the benefits. When it was profitable to renounce his citizenship, he turned his back on his country, even lying about how much he was worth to avoid paying one last time,” said Special Agent in Charge Christopher J. Altemus Jr. of the IRS Criminal Investigation (IRS-CI) Texas Field Office. He added, “As criminal investigators for the IRS, we are not limited by our nation's borders. He may have walked out on our country, but he didn't leave our sight.”

In 2023, Schmidt paid approximately $5.8 million to purchase a house in Snowmass Village, Colorado, and sold it three 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.

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

Assistant Attorney General Colin McDonald of the Justice Department’s National Fraud Enforcement Division and U.S. Attorney Justin R. Simmons for the Western District of Texas made the announcement.

IRS-CI investigated the case

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.

On April 7, the Department of Justice announced the creation of the National Fraud Enforcement Division (Fraud Division). The Fraud Division was laser-focused on investigating and prosecuting those who commit fraud against the American people. The Department’s work to combat fraud supports 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.