I remember reading this on Reddit and was really confused how this could happen. If he has gains, and then has losses, those losses should offset the gains. The only thing I can figure is the gains were 2017 and losses will go on 2018 taxes, so he's not out that money but will be out that money for a year if that makes sense?
Could he really have nothing to show for it but still owe 50K?
Here's my other thing, assuming he's using an exchange like Binance, they aren't reporting to the IRS so why not just act like that never happenned and only claim anything he's cashed out through Coinbase and/or Gemini?
As you said, the problem was he realized gains in 2017, and his losses are in fiscal 2018. He may have problems paying the difference.
I hate to encourage people to cheat taxes, however in his circumstance, and given how overly complicated our tax system is, as well as the lack of clarity on crypto taxes, as well as the lack of clear reporting from exchanges, I would almost tell the kid look, pretend that the altcoin trading never happenend, only report on what came out of Coinbase because that's all the IRS is goign to have reported to them, if even that.
I was in the middle of writing something like this as the reason why I think the story is BS, but you beat me to it.
In my opinion, someone who is dealing with those numbers knows a thing or two or know somebody who knows a thing or three.