Atlanta Internet Entrepreneur Sentenced for Hiding Income Overseas

An Atlanta-based internet entrepreneur who made real money in the online world called “Second Life” has been sentenced to prison after pleading 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 Wednesday.

Gregg A. Kaminsky, 46, was sentenced to four months in federal prison, followed by two months of home confinement and two years of probation. Kaminsky must also complete 200 hours of community service and pay the IRS $91,983, the U.S. Attorney’s Office said.

Kaminsky was previously ordered to pay the IRS a civil penalty of $250,635.20 following his December guilty plea to charges of 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.

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 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 federal financial aid to complete an Executive MBA program 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, $125,000 of which would have been collected by the IRS had Kaminsky been honest about his finances.

“Federal tax revenue is crucial to protecting our borders; fighting terrorism, cybercrime, and other national security threats; providing disaster relief; and to performing other critical government functions,” said Acting U. S. Attorney John Horn. “This office is committed to investigating and prosecuting those who intentionally avoid paying their fair share, whether their schemes involve income earned or hidden offshore, here at home, or even 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.”