A senate committee is investigating whether a prominent investor of cryptocurrency has violated the federal tax legislation to save hundreds of millions of dollars after he had moved to Puerto Rico, a popular offshore tax paradise, according to a letter assessed by the New York Times.
Senator Ron Wyden, a democrat in Oregon, sent the letter on January 9 to Dan Morehead, the founder of Pantera Capital, one of the largest crypto investment companies.
The letter said that the Senate Financing Committee was investigating compliance with the tax by rich Americans who had moved to Puerto Rico to take advantage of a special tax benefits for the inhabitants of the island who can reduce tax accounts to zero.
The investigation was aimed at people who had wrongly applied the tax benefits to prevent tax from being paid on income that were earned outside Puerto Rico, according to the letter.
“In most cases, the majority of profit can actually be reported American source income, about American tax returns and subject to American tax,” said the letter.
The letter asked for detailed information from Mr Morehead about $ 850 million in investment profits he made after he had moved to Puerto Rico in 2020, and noted that he 'possibly treated the profits' as exempt from American taxes.
Mr. Morehead said in a statement that he moved to Puerto Rico in 2021. “I believe I acted in the right way with regard to my taxes,” he said.
Mr. Wyden was chairman of the Financial Committee until the Republicans took over control over the Senate last month. During his term of office, the committee investigated various strategies that rich Americans used to prevent him from paying taxes.
It is unclear what can come from the investigation. Under the Biden Administration, federal supervisors and democratic legislators have established the crypto industry and prominent technical figures. President Trump and Republicans in the congress have embraced crypto and have promised less aggressive enforcement.
A spokesperson for Mr Wyden said that the investigation was “constant” and further refused comments. A spokeswoman for the new chairman of the Financial Committee, Senator Michael D. Crapo of Idaho, did not respond to a request for comment.
For more than a decade, rich Americans, including many technical entrepreneurs, have come to Puerto Rico to take advantage of ACT 60, a tax benefits that was established under a different name in 2012. The income of the capital profit generated on US territory is not subject to local or federal income tax.
In recent years, the Ministry of Justice, the Internal Revenue Service and Wetgevers have investigated abuse of that system. The IRS has said that its criminal division has identified around 100 people who may have committed tax evasion.
A former Goldman Sachs trader, Mr Morehead, founded Pantera in the early 2000s and turned it into one of the largest investment companies aimed at Crypto, with more than 100 crypto companies in the past 12 years. They include large American crypto companies such as Circle, Ripple and Coinbase, which operates the largest marketplace for digital currencies in the United States.
After Mr. Morehead had moved to Puerto Rico, Pantera sold “a big position” and he generated capital gain “more than $ 1 billion,” said Mr Wyden's letter. Mr. Morehead's share in profits was more than $ 850 million, according to the letter.
The letter asked Mr. Morehead to share information regarding those transactions, including the names of his tax advisers. It also asked him to share a list with all the assets he sold during a resident of Puerto Rico, including cryptocurrencies.
