Tax investigation against Dan Morehead takes place as US authorities tighten crypto tax regulations.
Pantera Capital founder investigated for crypto tax evasion. Image: Livecoins
Investigation targets Dan Morehead
Dan Morehead, founder of the cryptocurrency investment fund Pantera Capital, is being investigated for potential federal tax law violations.
The US Senate Finance Committee (SFC) sent a letter on 01/09, requesting information about more than $850 million in investment profits he earned after moving to Puerto Rico in 2020.
Puerto Rico is a US territory known as a "tax haven". Most residents there are exempt from federal income tax. Just residing in Puerto Rico for 183 days of the year can make one a legal resident of the island.
According to Senator Ron Wyden's letter, Morehead may have considered this profit as tax-free, even though it was actually income sourced from the US and subject to federal taxes.
For his part, Morehead maintains that he has complied with tax laws, but the investigation is still ongoing. This raises the question of whether wealthy investors can exploit Puerto Rico's tax benefits to avoid paying taxes in the US.
US tightens crypto tax oversight
The investigation into Morehead comes as the US is increasing tax oversight of the cryptocurrency sector. In June 2024, the IRS issued new regulations requiring cryptocurrency transactions to be reported by third parties. Starting in 2025, centralized crypto exchanges (CEXs) and brokers will have to report detailed information on asset sales and exchanges. However, earlier this year, the IRS delayed this tax reporting rule until 2026, to give platforms more time to adapt.
According to some blockchain experts, this regulation could create a "paradoxical situation" where investors shift to using decentralized exchanges (DEXs) to avoid oversight, making tax collection more difficult and deviating from the government's initial intent.
In response to the IRS's tightening regulations, the crypto community has taken some resistance actions. The Blockchain Association filed a lawsuit against the IRS in December 2024, alleging that the new regulatory framework violates the Constitution. Specifically, they object to classifying DEXs as "brokers", as this would require them to collect and report user transaction data, which is infeasible and a violation of privacy.
Today we're taking action, filing a lawsuit that argues today's broker rulemaking violates the Administrative Procedure Act and is unconstitutional.
— Kristin Smith (@KMSmithDC) December 28, 2024
We stand with our nation's innovators and will continue working to ensure the future of crypto – and DeFi – is here in the United… https://t.co/CwZWzjwT5O
Pantera Capital's Remarkable Success
Morehead founded Pantera Capital, the first cryptocurrency investment fund in the US, which has achieved impressive growth, generating over 130,000% returns on its initial investments. Specifically, the Pantera Bitcoin Fund, launched in 2013, has achieved 1,300 times the returns of its initial Bitcoin purchase price of $74/BTC. Pantera also "heavily invested" in the TON blockchain in 2024.
Currently, Pantera Capital manages over $5 Billion in assets, with more than 100 venture investments and 47% of its capital invested outside the US. The fund's success further highlights the scale of profits Morehead may have earned by moving to Puerto Rico.
Compiled by Coin68
