Dan Morehead, founder and managing partner of Pantera Capital, is under investigation by the U.S. Senate Finance Committee (SFC) for possible tax law violations related to over $850 million in cryptocurrency profits. The inquiry focuses on whether Morehead improperly claimed tax exemptions after relocating to Puerto Rico, a jurisdiction known for its favorable tax incentives.
Senate Questions Morehead’s Tax Strategy
On January 9, 2025, Senator Ron Wyden, chairman of the SFC, sent a letter requesting details about Morehead’s substantial investment gains following his 2021 move to Puerto Rico. The committee is investigating whether these profits were incorrectly classified as exempt from U.S. taxes.
The SFC expressed concerns that a significant portion of these earnings might still qualify as U.S.-sourced income, which remains taxable under U.S. law. In the letter, the committee stated, “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.”
Morehead responded to the allegations, asserting, “I believe I acted appropriately with respect to my taxes.” He also confirmed that he had relocated to Puerto Rico in 2021.
Pantera Capital, founded by Morehead, holds the distinction of being the first cryptocurrency investment firm in the United States. The firm manages over $5 billion in assets, with more than 100 venture investments and nearly 47% of its capital allocated outside the U.S.
Regulatory Crackdown on Crypto Taxation
This investigation reflects growing scrutiny of cryptocurrency taxation and the use of offshore tax strategies. In June 2024, the Internal Revenue Service (IRS) introduced new regulations requiring third-party tax reporting for U.S. cryptocurrency transactions, set to take effect in 2025. These measures aim to enhance transparency and compliance in the rapidly evolving digital asset market.
Puerto Rico’s tax incentives, particularly under Act 60, offer significant benefits such as a 0% tax rate on passive income and corporate tax rates as low as 2%. These policies have attracted wealthy investors, particularly from the tech and crypto sectors, seeking to reduce their tax burdens. However, critics argue that such incentives contribute to economic disparities and facilitate tax avoidance.
The outcome of this investigation could have significant implications for Morehead, Pantera Capital, and the broader cryptocurrency sector. It underscores the need for clear regulatory guidelines and strict adherence to tax laws as digital assets become more integrated into mainstream finance.
