Prominent Cryptocurrency Investor Faces Senate Tax Inquiry
A Senate committee is investigating whether a prominent cryptocurrency investor violated federal tax law to save hundreds of millions of dollars after he moved to Puerto Rico, a popular offshore tax haven, according to a letter reviewed by The New York Times.
Senator Ron Wyden, an Oregon Democrat, sent the letter on Jan. 9 to Dan Morehead, the founder of Pantera Capital, one of the largest crypto investment firms.
The letter said the Senate Finance Committee was investigating tax compliance by wealthy Americans who had moved to Puerto Rico to take advantage of a special tax break for the island’s residents that can reduce tax bills to zero.
The investigation was focused on people who had improperly applied the tax break to avoid paying taxes on income that was earned outside Puerto Rico, according to the letter.
“In most cases, the majority of the gain is actually U.S. source income, reportable on U.S. tax returns, and subject to U.S. tax,” the letter said.
The letter requested detailed information from Mr. Morehead about $850 million in investment profits he made after moving to Puerto Rico in 2020, noting that he “may have treated” the gains as exempt from U.S. taxes.
Mr. Morehead stated in a press release that he had moved to Puerto Rico by 2021. He said: “I think I acted correctly with regard to my taxes.” Wyden served as chairman of the Finance Committee from the time the Republicans gained control of the Senate in the last month. It is not clear what the outcome of the investigation will be. Under Biden’s administration, federal regulators acted against the crypto industry as well as prominent tech figures. President Trump and Republicans in Congress have embraced crypto, promising less aggressive enforcement.
A spokesman for Mr. Wyden said the investigation was “ongoing” and declined further comment. A spokesperson for Senator Michael D. Crapo, the new Finance Committee chair from Idaho, didn’t respond to a comment request. Capital gains generated on U.S. territories are not subject to federal or local income taxes. The I.R.S. The I.R.S. has stated that its criminal division has identified approximately 100 people who could have committed tax fraud. According to the letter from Mr. Wyden, Pantera made capital gains of “over $1 billion” after Mr. Morehead relocated to Puerto Rico. The letter stated that Mr. Morehead received a share of gains of more than $850,000,000. It also asked him to share a list of any assets he sold while a resident of Puerto Rico, including cryptocurrencies.
