Pantera Capital Founder Morehead Probed for Alleged $100M+ Tax Evasion in Puerto Rico

Executive Summary

Senator Ron Wyden has publicly accused Pantera Capital founder Dan Morehead of non-cooperation in a multi-month inquiry into alleged tax evasion. The investigation concerns Morehead's Puerto Rican residency and potential improper avoidance of over $100 million in federal taxes, intensifying scrutiny on high-net-worth crypto investors.

The Event in Detail

Senator Ron Wyden (D-OR), Ranking Member of the Senate Finance Committee, has initiated an investigation into Dan Morehead, founder of Pantera Capital, for allegedly improperly avoiding over $100 million in U.S. federal taxes. The inquiry focuses on Morehead's relocation to Puerto Rico, a U.S. territory with significant tax incentives, and his subsequent tax declarations. The Senate Finance Committee (SFC) is examining whether Morehead improperly classified over US$850 million (AU$1.33 billion) in investment profits as exempt from federal taxes.

According to a letter from Senator Wyden dated January 9, Pantera Capital reportedly sold a large position, generating capital gains exceeding $1 billion, shortly after Morehead obtained a Puerto Rican tax grant. Senator Wyden stated, "It is my understanding your share of these gains … was hundreds of millions of dollars. It is also my understanding that you treated the entire [gain] as exempt from U.S. tax, even though the lion's share of these gains accrued while you still resided in California." The Senator's team received information indicating this transaction and the timing.

Morehead has denied the allegations, stating, "I believe I acted appropriately with respect to my taxes." A discrepancy exists in the reported timeline of Morehead's residency, with Senate investigators indicating a move in 2020, while Morehead claims 2021. This difference is crucial for the tax treatment of hundreds of millions in cryptocurrency profits. The investigation has also identified Jeffrey Rubinger, a Miami-based attorney, as having advised Morehead and other clients on tax strategies involving Puerto Rico residency, with concerns raised about previous inaccurate advice provided by Rubinger to another client regarding built-in gains.

Market Implications

The investigation into Dan Morehead underscores a growing trend of increased regulatory scrutiny on tax compliance within the cryptocurrency sector and for high-net-worth individuals utilizing Puerto Rico's tax incentives. This heightened attention could lead to stricter enforcement of existing tax laws or the clarification of ambiguities surrounding crypto gains and international residency. Such developments may impact investment structures and capital flows within the digital asset space, potentially fostering caution among investors regarding tax planning strategies.

From 2020 to 2026, Puerto Rico is projected to lose $4.5 billion in revenue due to tax breaks for wealthy investors. An IRS whistleblower has estimated that over $10 billion in income is shielded from federal taxes annually under current rules. Critics argue that the influx of these investors has not brought promised economic growth but has "raised costs and driven displacement on an island where the poverty rate is already 40 percent." This broader context suggests that individual cases like Morehead's are part of a larger systemic challenge with potential ramifications for the perception and stability of crypto-related investment vehicles.

Expert Commentary

Senator Ron Wyden has been explicit about the seriousness of the allegations, stating, "These are serious allegations of potential abuse of Puerto Rico tax incentives to avoid the payment of U.S. taxes that you must immediately address." He further emphasized that income sourced in the U.S., particularly gains accrued before establishing Puerto Rican residency, should remain taxable under U.S. law. His letter indicates a firm stance that "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."

Congresswoman Nydia M. Velázquez (D-NY) has also voiced concerns, stating that "For years, some of the wealthiest U.S. investors in digital assets have used Puerto Rico to avoid paying federal taxes." These statements from prominent legislative figures highlight the political will to address perceived tax avoidance through Puerto Rico's tax programs.

Broader Context

Pantera Capital, known as the first U.S. crypto investment fund, has a history of significant returns, with its initial investments reportedly growing over 130,000% and its Bitcoin Fund generating returns over 1,000 times its original purchases. The firm currently manages over US$5 billion in assets. Despite the ongoing tax inquiry, Pantera Capital continues to expand its crypto footprint, notably embarking on a $1.25 billion initiative to transform a Nasdaq-listed company into a dedicated Solana treasury vehicle, tentatively named "Solana Co." This initiative involves an initial $500 million capital raise, followed by an additional $750 million through warrants, signifying a substantial institutional commitment to single-cryptocurrency treasuries.

The investigation into Morehead is part of a broader crackdown on cryptocurrency tax compliance. In June 2024, the IRS introduced new rules requiring third-party tax reporting on U.S. crypto transactions, a move challenged by the Blockchain Association in a December 2024 lawsuit arguing unconstitutionality. Furthermore, on April 22, 2025, Congresswoman Nydia M. Velázquez (D-NY) introduced the Fair Taxation of Digital Assets in Puerto Rico Act, a bill aimed at closing loopholes that allow wealthy digital asset investors to avoid federal taxes by claiming Puerto Rican residency. This legislative effort, co-sponsored by Reps. Alexandria Ocasio-Cortez (D-NY) and Delia Ramírez (D-IL), seeks to ensure that income from digital assets is subject to federal taxation regardless of residency in Puerto Rico, indicating a concerted effort across multiple governmental branches to address these tax-related issues within the burgeoning crypto economy.