He was arrested June 12, 2002 on insider trading charges. On October 15, he pleaded guilty to charges of securities fraud, bank fraud, obstruction of justice, and perjury.
On March 3, 2003 he pleaded guilty to charges of conspiracy and wire fraud for avoiding $1.2 million in sales taxes on $15 million in artwork. The art included works by Mark Rothko, Richard Serra,Roy Lichtenstein, and Willem de Kooning, purchased between June 2000 and October 2001. He did not pay the necessary taxes at the time of purchase, but did pay the taxes in fall 2002.
On June 10, 2003, Waksal was sentenced to seven years and three months in prison and ordered to pay more than $4 million in fines and back taxes, all the maximum punishments allowable under law. Waksal is not eligible for parole. Waksal wanted to go to Federal Prison Camp, Eglin, but instead he went to Federal Correctional Institution, Schuylkill.
He was serving time in the Federal Correctional Institution, Otisville in New York state. Waksal was released in August 2008.