Senator Probes Crypto Exec's Puerto Rico Residency Claims to Reclassify $1B in Gains

Senator Ron Wyden (D-Ore.), the top Democrat on the Senate Finance Committee, has intensified scrutiny of Dan Morehead, founder of Pantera Capital, alleging potential misuse of Puerto Rico's tax incentives to avoid over $100 million in U.S. federal taxes. The investigation, initiated in January 2025, focuses on whether Morehead misrepresented his residency status to reclassify capital gains as Puerto Rico-sourced income, thereby exempting them from U.S. tax liability. Wyden's letter to Morehead, dated October 1, 2025, cited evidence that Pantera Capital generated over $1 billion in capital gains shortly after Morehead relocated to Puerto Rico and secured a tax grant under Act 60, a law offering zero tax on passive income for qualifying residentstitle1^[1]. The senator emphasized that the majority of these gains accrued while Morehead resided in California, raising concerns about the legitimacy of his residency claimstitle2^[2].

The probe also highlights the role of Jeffrey Rubinger, a Miami-based attorney who advised Morehead and other clients on Puerto Rico tax strategies. Rubinger previously provided inaccurate legal opinions to Suresh Gajwani, who was recently prosecuted for tax fraud involving similar residency claimstitle3^[3]. Wyden noted that IRS criminal agents and federal prosecutors are investigating attorneys who knowingly mislead clients on tax residency requirements, underscoring systemic risks in the sectortitle1^[1]. The senator criticized Morehead's legal team for ceasing cooperation after initially agreeing to provide information, framing the lack of response as obstructiontitle4^[4].

Puerto Rico's Act 60, enacted in 2022, allows qualifying residents to pay 0% tax on capital gains and dividends, a policy designed to attract high-net-worth individuals. However, the law requires new residents to maintain U.S. tax obligations for income earned before residency. Wyden argued that Morehead's strategy-selling a $1 billion Pantera position shortly after relocating-exploited a loophole to treat pre-residency gains as Puerto Rico-sourced, thereby evading U.S. tax liabilitytitle1^[1]. The Senate Finance Committee has requested documentation to verify residency timelines and tax filings, but Morehead has not publicly responded to the allegationstitle2^[2].

Pantera Capital, a major player in crypto treasury strategies, has faced heightened regulatory scrutiny amid its aggressive expansion. In late September 2025, the firm rebranded Helius Medical Technologies as Solana Company, pivoting to a $1.25 billion Solana treasury initiativetitle4^[4]. While the firm has not directly addressed the tax probe, a spokesperson referenced Morehead's prior statement to the New York Times, in which he asserted he "acted appropriately" with respect to his taxestitle3^[3]. The company's continued investment in digital asset treasuries, including Wall Street-traded entities, has drawn attention as regulators seek clarity on residency-based tax benefitstitle4^[4].

The investigation aligns with broader efforts to tighten oversight of crypto tax planning. Lawmakers, including Elizabeth Warren (D-Mass.), have scrutinized high-net-worth individuals in the crypto and AI sectors for potential ethics violations. Meanwhile, SEC Chair Paul Atkins has signaled a pro-crypto stance, including plans for an "innovation exemption" by year-endtitle4^[4]. However, the Senate Finance Committee's hearing on crypto tax issues in October 2025 highlighted challenges for both the IRS and industry, as lawmakers warned of a potential surge in tax reporting complexitiestitle3^[3].

The case underscores growing bipartisan interest in curbing tax avoidance through residency loopholes. Representative Nydia Velázquez (D-NY) has proposed legislation to amend Puerto Rico's tax code, requiring investors to pay federal taxes on digital asset gains. While such measures face political hurdles in a Republican-led Congress, the Morehead probe could accelerate calls for legislative reform. For now, the Senate Finance Committee's inquiry remains a symbolic but limited effort, as Chair Mike Crapo (R-Ida.) has not joined the investigationtitle3^[3].