Italian financial investigators uncovered a multi-year crypto tax evasion scheme that relied on Bitcoin Ordinals and BRC-20 tokens to generate and conceal more than €1 million in undeclared capital gains. The case, detailed by Chainalysis on May 20, shows how blockchain intelligence tools transformed a fragmented set of transactions into a complete financial map tied to a real-world identity.
Authorities from the Guardia di Finanza, including units in Foggia and Rome, began with what appeared to be a routine inquiry into unreported income. The investigation escalated after officers discovered that the suspect accumulated significant wealth through digital assets while also receiving public subsidies.
Recently, investigators in Italy used Chainalysis to uncover a multi-year, €1 million tax fraud and subsidy scheme fueled by Ordinals and BRC-20 tokens. Read our latest blog to learn more: https://t.co/SMucovqOcW
— Chainalysis (@chainalysis) May 20, 2026
A hardware wallet becomes the entry point
The case turned after investigators seized a Ledger hardware wallet during a home search. Hardware wallets store private keys rather than funds. They generate new addresses for each transaction, which creates the appearance of disconnected activity across the blockchain.
Chainalysis stated that this fragmentation did not prevent analysis. Investigators used Reactor, the company’s blockchain intelligence platform, to apply common-input-ownership heuristics. This method allowed them to group multiple wallet addresses under a single controlling entity.
What appeared as unrelated transactions formed a coherent structure once analyzed. The wallet cluster revealed the financial core of the operation.
Ordinals and BRC-20 tokens drive the scheme
The investigation required a detailed breakdown of Bitcoin Ordinals and BRC-20 tokens. Ordinals assign unique identifiers to individual satoshis and allow users to attach data such as text or images. BRC-20 tokens extend this concept by enabling token creation and transfers through text-based inscriptions without smart contracts.
Chainalysis described a consistent operational cycle. The suspect transferred satoshis from a primary wallet to inscription services. Newly created assets then appeared on marketplaces. Sales generated proceeds in Bitcoin, which returned to the main wallet.
The process repeated over time. Each cycle produced gains that exceeded the initial cost of inscription. Chainalysis confirmed that the suspect reinvested profits into new assets, which created a continuous loop of minting, listing, selling, and fund consolidation.
The firm noted that the activity could appear random without proper tools. Reactor identified a structured monetization pattern instead of isolated transactions.
On-chain transparency meets real-world identity
Blockchain records provide transaction visibility, but they do not include names. Investigators bridged this gap through centralized exchanges. These platforms hold Know Your Customer data that links accounts to verified identities.
Chainalysis stated that cooperation with exchanges allowed authorities to match wallet activity with off-chain records. This step confirmed the identity behind the wallet cluster and completed the evidentiary chain.
The company summarized the principle in a statement: “the technical novelty of crypto does not equal anonymity.”
Tax gaps and policy pressure intensify
The Italian case arrives as governments face persistent gaps in crypto tax reporting. A 2026 Review of Accounting Studies paper found that IRS data captured between 32% and 56% of estimated U.S. crypto owners. The figures rely on comparisons with survey data and other public sources.
Research from the National Bureau of Economic Research focused on Norway and identified widespread noncompliance, even among users of regulated exchanges. The paper noted that enforcement strategies must remain targeted due to the small liabilities of many investors.
The IRS has already outlined the scale of the broader issue. For the 2022 tax year, the agency projected a gross tax gap of $696 billion and a net gap of $606 billion after enforcement and late payments. Underreporting accounted for $539 billion of the total.
U.S. lawmakers weigh crypto tax changes
The investigation in Italy coincides with policy debates in Washington. The proposed PARITY Act would direct the U.S. Treasury to study tax treatment for small crypto payments and issue guidance instead of immediate exemptions.
Reporting requirements remain under scrutiny. Kraken submitted 56 million crypto tax forms for 2025, with most linked to transactions below $50. The exchange has urged lawmakers to raise reporting thresholds and simplify compliance for low-value activity.
Lawmakers have also addressed staking taxation. A group of 18 House members requested a review of IRS guidance issued in 2023. The proposal includes potential deferral of tax obligations tied to staking and mining rewards.
A case that reflects a broader shift
The Italian investigation shows how newer crypto asset classes enter enforcement focus. The suspect relied on technical complexity to obscure income flows. Blockchain data preserved each transaction, which allowed reconstruction once the correct tools came into play.
Chainalysis emphasized that digital asset innovation does not remove traceability. The case demonstrates how on-chain analysis and exchange cooperation combine to expose financial misconduct, even when it spans multiple years and advanced token standards.
Gunel Ismayilova
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