TikTok and YouTube Are Filled With Crypto Tax Avoidance Advice

Crypto influencers and tax attorneys are offering advice about the best way to keep all of your crypto profits safe from the government.

The growth of crypto trading has led to a huge rise in a number of resources about how to handle taxes on crypto gains. But, for every expert or influencer offering clarity on how to properly pay taxes on capital gains from crypto trades, there seems to be another person offering insight into how to dodge taxes. Indeed, platforms like YouTube and TikTok are filled with videos with titles like “Crypto Tax Evasion 101” or “Avoiding Capital Gains on Cryptocurrency,” many of which were posted within the past year and have hundreds of thousands of views. 

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Part of this comes down to how complicated tracking crypto gains and losses has become with the ascension of decentralized finance, or DeFi, which encompasses more complex mechanics like airdrops, staking, yield farming, and other speculative endeavors based on digital tokens and assets that have yielded both short-term and long-term capital gains.

Perhaps an explosion of internet content aimed at avoiding crypto taxes isn’t surprising. Already, we’ve seen individuals move to Puerto Rico to take advantage of loopholes that free them from paying any taxes on crypto holdings provided they become residents of the island.

On the mainland, one way to take stock of this is to simply look at platforms like YouTube where crypto influencers offer tax advice. Take “Nichita Russu,” a pseudonymous 17-year-old who publishes content and trades crypto under what he claims is his mother’s name. Russu’s contribution to the canon is a step-by-step guide on YouTube titled "Crypto Tax Evasion 101," which features a thumbnail with antisemitic images and obligatory “This is not financial advice” disclaimers. 

"Hey guys, today I'm going to be talking about how I'm going to be evading taxes from my crypto and how I'm not going to pay a single nickel to these motherfuckers in the government,” Russu opens. “They can go suck my dick and they can go basically go fuck themselves because I'm not paying any fucking money to these fucking scumbags. ‘Oh lemme take your money so I can go bomb some brown kids in Syria. Yes, America, freedom.’ No, fuck you, basically."

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YouTube did not provide comment in time for publication, and neither did Russu.

In an important disclaimer, Russu admits he has never done taxes himself (“I’m 17, I never did taxes, but I know you have to report your own taxes”). His guide relies on trying to plausibly deny that you have custody of a wallet. Russu explains that aspiring tax cheats should send money to another wallet and act as if that was the result of a hack.

"You sent your money to a different address, that means you can't get taxed on it,” Russu adds. “That's different ownership, who's the owner? There's a lot of ifs, there's a lot of questions that have to be answered and they're never going to be answered. That's crypto, buddy."

From there, Russu recommends that crypto tax cheats connect to Tor, swap to ETH, and use the Tornado.cash mixing service to anonymously withdraw the crypto and deposit it to another wallet address. Russu explains that cheats can claim they simply found this wallet (how they obtained the private keys might be harder to explain) which happens to have ETH in it and decide to take out a loan against the ETH by using a protocol like Liquity that lets you collateralize crypto holdings. 

When one commentator pointed out that a simple audit would uncover this scheme, Russu simply replied the wallet would get “hacked” again and he would then collateralize crypto held in another token.

All this overlooks the ability of firms dedicated to tracking the laundering of cryptocurrency through forensic analysis of the blockchain. A host of services have emerged over the years with the explicit purpose of tracking the sort of activity that Russu believes have never been considered before by corporations or the federal government.

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Other videos are a bit more cautious (and informed) than Russu’s and go another route, seeking to minimize your tax bill instead of outright evading taxation, using the language of avoidance. Still, these videos all have names like “How To Avoid Crypto Taxes: Cashing out” and “How to AVOID Crypto Taxes - 4 Legal Examples (Beginner to Advanced).”

YouTuber Full Value Dan’s advice hinges on avoiding exchanges compliant with anti-money laundering (AML) protocols such as Know Your Customer (KYC). Such processes require that exchanges both identify their customers and perform due diligence by screening them or monitoring their transactions. Full Value Dan did not respond to Motherboard’s request for comment.

Mark J Kohler—CPA, tax attorney, cryptominer, and podcaster―has a video titled “Avoiding Capital Gains on Cryptocurrency” that provides tax strategies that rely on shell corporations, trusts, and retirement accounts to minimize taxable events (sales, swaps, airdrops, etc.) while maximizing your ability to acquire and trade crypto tax-free (or as close to tax-free as possible). Kohler did not respond to Motherboard’s request for comment.

In another video, a channel called WhiteBoard Crypto prefaces their guide by saying they "will cover the legal ways, but will discuss some illegal ways so you know what not to do. Or at least, that's my intention.” To that end, they overview strategies to legally avoid taxes as well as some aimed at evading taxes altogether, calling one particular method requiring the exploitation of friends and a gifting tax loophole as “illegal, and probably immoral” before quickly moving on to others.

On TikTok, we find a similar pattern: some influencers giving advice about legal tax avoidance strategies, others providing advice about how to avoid committing fraud and how to accurately track taxes owed, and some give a wink and nudge while talking about avoiding tax evasion. “Here’s how you can avoid taxes when you make money in crypto. I’m just a random guy on the internet, you should not listen to me. This is not advice,” one TikTok opens up. He lists some reasons why you should pay taxes before giving the camera a side-eye glance, suggests that many people don’t pay taxes on their crypto gains, and then proceeds to give some tips on how to avoid reporting capital gains. Russu, however, is again the most egregious example, with a snippet of his Youtube tax evasion advice on TikTok accruing 73,000 views before it was removed once Motherboard reached out.

"Our top priority is to promote a safe and positive experience so that everyone on TikTok can be free to express their creativity,” a TikTok spokesperson said in a statement to Motherboard. “We do not permit content that brings about financial or personal harm, or promotes illegal activity such as tax evasion."

That there are so many videos like this only reinforces the notion that many crypto traders and investors are not actually interested in the potential of this technology or even in using it to help catalyze a better future, but that they are interested in how to make as money as possible off of it and how to keep as much of that profit as they can. This isn’t unique to crypto, but an entire genre of tax avoidance content doesn’t look good. 

Tagged:

finance, retirement, taxes, Capital gains

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