Author: TaxDAO

With the rapid rise of the encryption market, regulatory risks represented by tax compliance have become increasingly prominent. In April 2024, Roger Ver, known as "Bitcoin Jesus", was accused by the United States Internal Revenue Service (IRS) of tax evasion of US$48 million and was arrested in Spain. For several months, the progress of this case has been disturbing the nerves of practitioners in the crypto asset industry, and has further attracted the crypto industry’s attention to tax compliance.

As Bitcoin exceeded 100,000 US dollars, the "Bitcoin Jesus" case also ushered in new developments last week. Roger Ver’s legal team filed a motion on December 4, 2024, asking the court to dismiss the IRS tax evasion charges against Roger Ver. Currently, he is still in Spain awaiting an extradition decision from the United States. TaxDAO will review the "Bitcoin Jesus" case in this article and give compliance suggestions on related tax risks.

1. The ins and outs of the Bitcoin Jesus case 1.1 Who is Bitcoin Jesus?

Roger Ver was born in Silicon Valley in the United States in 1979 and is a well-known liberal and anarchist. In 1999, he founded Memory Dealers while in college, with its main business being the resale of computer parts. After that, he dropped out of school and started running the company full-time, and earned his first million dollars at the age of 24 with his keen business sense.

In 2011, Roger Ver began investing in Bitcoin and announced that the company he founded, Memory Dealers, would accept Bitcoin payments, becoming the first company in the world to support Bitcoin payments. Since then, Roger Ver has continued to purchase and receive large amounts of Bitcoin through his personal identity and his companies, and has become the CEO of Bitcoin.com and the founder of the Bitcoin Foundation. He actively promoted the application and value of Bitcoin, promoted its early popularity, and accumulated huge influence in the field of crypto assets. Therefore, he was dubbed "Bitcoin Jesus" by the media and crypto community.

1.2 Why did the IRS sue Bitcoin Jesus?

In 2014, Roger Ver obtained citizenship of the Federation of Saint Kitts and Nevis and renounced his U.S. citizenship shortly thereafter. Under U.S. tax law, individuals who renounce citizenship are required to fully declare capital gains on their global assets, including Bitcoin holdings and fair market value. The IRS believes that Roger Ver concealed and underreported the value of his personal assets before renouncing his citizenship. After renouncing his citizenship, he will obtain and sell approximately 70,000 Bitcoins from companies in the United States he controls, earning nearly US$240 million in income. In this way, he evaded at least US$48 million in taxes payable.

In this regard, the IRS mainly made two accusations: First, Roger Ver failed to comply with exit tax regulations. In renouncing his U.S. citizenship, Roger Ver underreported who he was and what he was accused ofThe company concealed the actual number of Bitcoins held by the company, concealed the relevant transactions, and avoided this part of the tax liability. Second, Roger Ver violated his tax obligations as a non-U.S. tax resident. After quitting his U.S. citizenship, Roger Ver obtained and sold Bitcoins from U.S. companies he controlled in 2017, earning huge income. Although Roger Ver renounced his U.S. citizenship, since his company was located in the United States, Roger Ver did not report such income after transferring Bitcoins held by companies in the United States to his name, thus evading tax obligations.

2. Can Bitcoin Jesus “save” himself?

In the United States, tax evasion is considered a felony, punishable by up to 5 years in prison and a fine of up to $100,000 (individual) or $500,000 (company). According to U.S. precedent, in order to successfully charge Roger Ver with tax evasion, prosecutors generally need to prove three elements: (1) prove that Roger Ver has a large amount of tax debt; (2) have the intention to evade tax; (3) actively carry out tax evasion Behavior.

First of all, regarding the existence of a large tax debt, prosecutors need to trace back and calculate the total amount of unpaid taxes by Roger Ver, and demonstrate that the debt has reached the "substantial" standard. In Roger Ver’s case, the $48 million in unpaid taxes currently proposed by the prosecutors has clearly exceeded the “significant” standard recognized in judicial practice. It is difficult for Roger Ver’s legal team to avoid this element through vague defense. established.

Secondly, regarding the intentionality of tax evasion, the prosecutor needs to prove that Roger Ver’s tax evasion behavior was not accidental or negligent, but was subjectively intentional. For example, proof that Roger Ver provided false information to appraisers and tax preparers and failed to disclose key information about Bitcoin transactions could serve as evidence of such intent. Regarding this subjective element, the prosecution and defense still have room for game.

Finally, for active tax evasion, prosecutors need to prove that Roger Ver took active measures to conceal assets, underreport income or deceive taxes. Judging from the indictment, prosecutors cited a series of specific actions by Roger Ver, such as transferring funds to offshore accounts, concealing Bitcoin transactions, and exaggerating asset expenditures. These actions all meet the definition of "tax evasion" under U.S. tax law. If the authenticity and legality of the evidence related to these behaviors are not in question, they can be used as a powerful weapon for the prosecutor to successfully charge.

It is reported that Roger Ver’s legal team has submitted a motion to a federal judge on December 4, 2024, hoping that Trump will fulfill his promise to end strict encryption supervision and withdraw the criminal tax evasion charges against Roger Ver. They contend that U.S. tax law provides unclear guidance on crypto-assets, making it difficult for taxpayers to understand their legal responsibilities. At the same time, the legal team alleged that there were misconducts during the prosecution process, including selective citation and interpretation of relevant communications out of context.the content of the letter, and withholding evidence that might be beneficial to the defendant. In addition, they also believed that the prosecutors were suspected of selective enforcement in this case and did not fairly hold accountable other similar cases. Instead, they only targeted public figures such as Roger Ver to "kill chickens and scare monkeys."

Currently, the court has scheduled a hearing in February 2025 to consider the motion.

In general, Roger Ver’s case winning rate may be affected by many factors, including legal and legal factors. On a favorable note, his legal team argued that the tax law’s tax provisions for crypto-assets are unclear, adding to the defense’s argument that there are loopholes in the tax system. They also accused prosecutors of selective enforcement, which could undermine the legitimacy of IRS prosecutions if sufficient evidence could be provided. At the same time, it is particularly noteworthy that Trump intends to end the strict supervision of crypto assets. This attitude may bring a turning point in the case. However, the disadvantage is that the prosecution has a large amount of concrete evidence, including $48 million in unpaid taxes and a series of tax evasion records, and these behaviors are likely to meet the statutory requirements for tax evasion crimes. If the court remains neutral on , then how to ultimately evaluate subjective intent and the legality of the evidence may become the key to the judgment.

3. Looking at crypto tax risks from the Bitcoin Jesus case

The Bitcoin Jesus case has sounded the alarm on tax compliance for the crypto industry, and is especially of great warning to individual investors in crypto assets. The strengthening of international cooperation and the advancement of technological means are continuing to reduce the space for investors to avoid tax. For investors in the crypto industry, tax compliance has become a critical issue that cannot be avoided.

3.1 International tax cooperation has strengthened, and offshore tax avoidance has become more difficult

Roger Ver gave up his U.S. citizenship and became a citizen of St. Kitts and Nevis, trying to use his offshore status to avoid U.S. tax obligations. This is a common practice Ways to avoid taxes.

However, with the strengthening of international tax cooperation, the difficulty of tax avoidance through offshore status has increased significantly. At present, more than 100 countries and regions have committed to join the CRS (Common Reporting Standard) system for automatic exchange of financial tax-related information, including the British Virgin Islands, Cayman, Bermuda, and the Bahamas, which are regarded as "tax havens" , Cook Islands and Marshall Islands, etc.

Take the United States as an example. In recent years, the IRS has gradually paid attention to the supervision of this type of tax avoidance and pursued this behavior through international cooperation. When offshore companies or individuals use offshore status to avoid taxes, if they still have significant economic activities in the United States (such as company operations and customer sources), they may be deemed to be subject to tax liability by the U.S. Internal Revenue Service and other tax authorities. At the same time, if high-net-worth investors store their assets in offshore wallets or transfer them to jurisdictions that have not signed tax cooperation agreements (such as certain tax havens) for transactions, their overseas asset reporting obligations may also be triggered. For example, the U.S. FATCA Act requires declaration of global account assets. Failure to comply with this requirement may result in penalties.payment or even criminal charges.

3.2 On-chain tracing technology upgrades, tax avoidance of hidden transactions is limited

For high-net-worth Bitcoin investors like Roger Ver, whether to truthfully declare capital gains tax when selling large-scale assets is a focus of taxation.

Some high-net-worth investors may use on-chain anonymity technology or privacy coins (such as Monero, Zcash) to hide transactions, but with the advancement of on-chain tracking technology, the risk of this strategy has increased significantly. Advances in technological means have made transactions on the blockchain more transparent, and some tax authorities can directly track data on the chain and analyze the flow of funds. At the same time, some jurisdictions have begun to cooperate with blockchain analysis companies to further restrict tax avoidance operations using crypto assets.

In addition, some investors may also try to reduce tax disclosure and payment obligations by diversifying their assets through complex transaction structures or multiple wallets. However, this approach can easily be regarded as intentional tax evasion by the tax authorities, which may lead to legal risks. For example, if you transfer assets to multiple wallets or use complex cross-border transactions to hide the actual source of income, if you are discovered, you will not only have to pay back taxes, but you may also face fines or even criminal charges.

4. Tips and suggestions from TaxDAO

Despite the lessons learned by Roger Ver and others, some crypto-asset investors may underestimate the intensity of tax tracking and enforcement of crypto-assets. Cryptoassets are decentralized, but that doesn’t mean investors can evade tax regulations. If an investor fails to do tax compliance, it may result in back taxes, fines or even criminal prosecution. In order to ensure transaction compliance and avoid tax risks, investors in the crypto-asset field should pay attention to the following: First, face tax responsibilities and enhance compliance awareness. Paying taxes is not only a legal responsibility, but a qualified tax return can also serve as proof of the legality of the source of assets. Whether you are an individual investor or a company, you should get rid of the misunderstanding that "decentralization means no taxes". Paying taxes in compliance with the law not only reduces legal risks but also enhances public and regulatory trust in their operations and financial health.

Second, strengthen tax planning and management to prevent unexpected risks. Individual investors should develop the habit of regularly auditing assets and income, record all transaction and income data, ensure that tax declarations are completed on time and accurately, plan the payment of capital gains tax and income tax in advance, and avoid facing the consequences of unexpected declarations or investigations. Extra pressure. On the corporate side, it is necessary to establish a systematic tax management framework, including token distribution records, income details and transparent tracking of cross-border capital flows, to ensure that every step of tax compliance is rigorous and standardized.

Third, pay close attention to developments and dynamically adjust investment strategies. Taxation in the cryptoasset space is complex and rapidly changing, with significant differences in regulations across jurisdictions. Investors should keep abreast of the latest developments in new tax regulations and international cooperation agreements, and assess their potential impact on their investment behavior. For example, adjusting asset allocation or transaction structure according to changes can effectively avoid risks and ensure compliance.

Fourth, relying onProfessional support to avoid misunderstandings. For high-net-worth investors or institutions involved in complex cross-border transactions, it’s wise to work with a professional who is familiar with crypto asset tax regulations. A professional team can provide comprehensive guidance on tax liabilities and requirements, helping investors identify potential risks in advance. Especially when working in multiple jurisdictions, professional advice can help avoid compliance mistakes caused by misunderstandings.

Through the above suggestions, investors can reduce the legal risks caused by tax non-compliance while achieving sustainable development within the compliance framework. Under the trend of gradual improvement and increasingly strict supervision, establishing tax compliance awareness as early as possible is a necessary choice for every crypto asset investor.