Atlanta Internet Entrepreneur Pleads Guilty to Hiding Income Overseas

An Atlanta-based internet entrepreneur who made real money in the online world called “Second Life” has pleaded guilty to willfully hiding income and assets in overseas bank accounts to avoid paying income tax on it, the U.S. Attorney’s Office announced Thursday.

Gregg Kaminsky, CEO of Circlenet LLC, used bank accounts in Switzerland, Hong Kong, and Thailand to conceal money he made through his Second Life business and other sources. At one point, Kaminsky’s Swiss bank account had over $1 million dollars in it, prosecutors said.

While there’s nothing wrong with American citizens keeping assets in overseas bank accounts, these accounts must be documented to the Treasury Department through a Foreign Bank Account Report (FBAR), and applicable U.S. taxes must be paid on the assets in those foreign accounts.

Kaminsky failed to disclose these overseas assets, and even applied for and received a federal financial aid to complete studies at Emory University while having more than half a million dollars hidden in his Swiss bank account.

Once the Justice Department received permission to investigate previously highly-secretive Swiss bank account information, Kaminsky shifted his assets to his Hong Kong bank account and filed FBARs and amended tax returns showing his overseas assets. However, Kaminsky still failed to report $150,000 in taxable income he received through his Second Life business.

Over a 12 year period, Kaminsky hid over $400,000 in taxable income from the government, $100,000 of which would have been collected by the IRS had Kaminsky been honest about his finances.

Following his guilty plea to one count of wilfully failing to file a Foreign Bank Account Report with the U.S. Department of Treasury and failing to report his Second Life income, Kaminsky faces a maximum sentence of five years in prison. He will be sentenced on March 4, but has already been ordered to pay the IRS $250,635.20, half of the value of his Hong Kong bank account on June 30, 2009.

“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 in a statement. “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.”