On April 30, local time, "Bitcoin Jesus" Roger Ver was sued by the IRS for suspected tax evasion and fraud, involving nearly $50 million. The IRS published the indictment against Ver on its official website. This article explores the basic facts of the case, the legal impact, and the compliance and regulatory implications that may be brought to the crypto industry.
1 Overview of the case
Ver once lived in Santa Clara, California. In the early days, he was committed to investing in and promoting Bitcoin, and earned the nickname "Bitcoin Jesus". He founded MemoryDealers.com Inc. and Agilestar.com Inc., which mainly deal in computer and network equipment. The indictment pointed out that since 2011, Ver has begun to obtain Bitcoin in his personal capacity or through companies under his name, and has a wide influence in the crypto community; however, Ver is suspected of evading taxes when disposing of Bitcoin to obtain income.
How Ver is suspected of tax evasion
1. Failure to comply with exit tax regulations when renouncing US citizenship: In 2014, Ver obtained citizenship of the Federation of Saint Kitts and Nevis and renounced US citizenship. According to US tax law, when he renounced US citizenship, he should submit a detailed capital gains tax declaration covering global assets, including Bitcoin assets. It is alleged that he provided false information to his lawyers and asset appraisal team to underreport his assets, concealed the actual number of Bitcoins he held, and failed to report capital gains truthfully.
2. Tax obligations as a non-US tax resident: Although Ver renounced his US citizenship, he still had to bear the corresponding tax obligations because his company was based in the United States. It is alleged that in mid-2017, Ver obtained approximately 70,000 Bitcoins from his company and sold them in large quantities, earning approximately US$240 million, but did not report the relevant capital gains or pay the taxes due. The indictment claims that he concealed the fact that he received and sold these assets from his accountant, and therefore, he did not report any taxes in his 2017 tax return.
2 Analysis of Ver's Tax Evasion
Ver's alleged tax evasion strategies include submitting misleading information, false assets, and obscuring (cryptocurrency) ownership. The indictment states that "Ver attempted to minimize his tax burden through deceptive means." We believe that specifically in this case, the key points of tax law requirements and compliance are mainly the following:
Capital gains reporting of cryptocurrency: US tax law stipulates that individuals who renounce their citizenship must report the fair value of all their assets (including cryptocurrency), and recognize income at that value to calculate capital gains when renouncing their citizenship. Ver evaded this part of the tax obligation by underreporting the actual value and quantity of cryptocurrency he held.
Withholding Taxes on Foreign Tax Residents: Foreign residents who receive dividends from U.S. companies are subject to U.S. withholding taxes even when paid in cryptocurrencies. Ver is suspected of intentional tax evasion by transferring Bitcoin held by U.S. companies to his name and failing to report such income.
3 Elements of Federal Tax Evasion
In the United States, tax evasion is considered a felony, punishable by up to five years in prison and a fine of up to $100,000 (for individuals) or $500,000 (for companies). As the case against Ver moves forward, prosecutors will need to establish a strong case for tax evasion based on U.S. case law, particularly precedents such as United States v. Josephberg. To successfully prove that Ver is guilty of federal tax evasion, prosecutors must prove the following three elements:
1. Substantial Tax Debts: Ver must be shown to have a substantial amount of unpaid taxes. If the allegations are true, Ver’s failure to report capital gains from the sale of approximately 70,000 bitcoins would have generated a significant amount of taxable income.
2. Intent to evade taxes: This is a subjective element, where prosecutors need to prove that Ver intentionally evaded taxes that were legally due. This involves proving that his actions were not merely accidental or negligent, but were intentional and calculated to avoid paying taxes. His actions of providing false information to appraisers and tax preparers, as well as failing to disclose key information about his bitcoin transactions, serve as evidence of such intent.
3. Actively engaged in tax evasion: The last element requires that Ver took active action to evade taxes. This includes taking steps to conceal assets, underreport income, or deceive tax authorities, such as his alleged manipulation of company valuations and personal asset declarations.
4 Impact of this case on the crypto industry
The authorities’ charges against Ver highlight the need for transparency and adherence to compliance standards. This case is a major intersection of cryptocurrencies and regulatory compliance. It is a reminder to the community that it is very important to comply with tax compliance obligations. Especially in the United States, tax laws have strict requirements for cryptocurrency compliance reporting, and the IRS may also initiate accountability procedures for taxes that were not reported/evaded in previous tax reporting quarters (as was the case in this case).
Going forward, the industry must adapt to increasingly stringent regulatory expectations to gradually form a stable and reputable industry environment. The US charges against Ver not only point out his personal tax responsibilities, but also emphasize that the crypto industry must ensure long-term survival through compliance and transparency - tightening regulation is already a trend.
IRS indictment link:
https://www.justice.gov/opa/pr/early-bitcoin-investor-charged-tax-fraud
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