Quick Facts:
- The U.S. Senate Finance Committee is investigating Dan Morehead over potential tax violations on $850 million in crypto gains.
- Morehead moved to Puerto Rico in 2021, where tax laws offer exemptions on capital gains.
- He denies any wrongdoing, asserting that his tax filings comply with federal law.
- The investigation follows the IRS’s introduction of new crypto tax reporting rules in June 2024.
Dan Morehead, founder and managing partner of Pantera Capital, is under investigation by the U.S. Senate Finance Committee (SFC) for potential federal tax law violations after relocating to Puerto Rico, a well-known tax haven. The investigation centers on over $850 million in investment profits Morehead earned after his move to the island in 2020.
The inquiry was initiated following a letter from Senator Ron Wyden, dated January 9, requesting information on whether Morehead improperly treated these profits as exempt from U.S. taxes under Puerto Rico’s tax incentive laws. The letter, which was reviewed by The New York Times, suggests that Morehead “may have treated” these profits as tax-exempt, prompting the Senate Committee to probe his filings for potential violations of federal tax law.
In recent years, it has been a serious contention that many wealthy Americans who moved to Puerto Rico misapply local tax breaks. The letter emphasized that in most cases, gains sourced from the U.S. remain “reportable on U.S. tax returns and subject to U.S. tax,” even if the taxpayer resides in Puerto Rico.
Morehead, who moved to Puerto Rico in 2021, denied any wrongdoing, stating,
“I believe I acted appropriately with respect to my taxes.”
Pantera Capital: an Early Bitcoin Investor
Morehead has built a prominent profile in the crypto space. His firm, Pantera Capital, was the first cryptocurrency fund in the U.S. and has seen its initial investments grow by over 130,000%, according to a blog post he published on November 26, 2024. He launched the Pantera Bitcoin Fund in July 2013, achieving a lifetime return of more than 1,000x from its first Bitcoin purchase at $74. Morehead noted that at the time, “1% of financial wealth hadn’t come across Bitcoin.”
Today, Pantera Capital manages over $5 billion in assets, with more than 100 venture investments, and 47% of its capital deployed outside the U.S., according to the firm’s homepage.
“Pantera’s global macro strategy invested over $1 billion of institutional allocations. In 2013, Pantera created the first blockchain hedge and venture funds in the United States,” – The company website says
Regulatory Context and Crypto Tax Compliance Crackdown
The inquiry comes as U.S. regulators intensify their focus on cryptocurrency tax compliance. In June 2024, the Internal Revenue Service (IRS) announced new rules mandating third-party tax reporting for all U.S. crypto transactions. Under these rules, starting in 2025, centralized crypto exchanges (CEXs) and brokers must report digital asset sales and exchanges to the IRS.
However, the IRS rule has sparked industry backlash. In December 2024, the Blockchain Association filed a lawsuit against the IRS, arguing that the new regulations are unconstitutional. As the Senate probe into Morehead unfolds, the case could set a precedent for how crypto investors navigate U.S. tax laws. With new IRS regulations looming, the debate over crypto taxation is only getting started
