Review of the entire arrest of “Bitcoin Jesus”: Why did the IRS suddenly launch an attack 10 years later?

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 background 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, while in college, he founded Memory Dealers, a company whose main business was reselling computer parts. After that, he dropped out of school and started running the company full-time, earning his first million dollars at the age of 24 with his keen business acumen.

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 St. Kitts and Nevis and renounced his U.S. citizenship shortly after. 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. This resulted in the company evading at least $48 million in taxes due.

In this regard, the IRS mainly made two accusations: First, Roger Ver failed to comply with exit tax regulations. When he renounced his U.S. citizenship, Roger Ver underreported the actual number of Bitcoins held by himself and the companies he controlled, concealed relevant transactions, and avoided this part of his tax liability. Second, Roger Ver violated his tax obligations as a non-U.S. tax resident. After withdrawing from 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, because his company was based in the United States, Roger Ver transferred Bitcoins held by U.S. companies to his name and failed to report such income, 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 (individuals) or $500,000 (corporations). According to U.S. precedent, in order to successfully accuse Roger Ver of tax evasion, prosecutors generally need to prove three elements: (1) Prove that Roger Ver has a large amount of tax debt; (2) There is an intention to evade tax; (3) Actively implement tax evasion Behavior.

First, 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 intention of tax evasion, the prosecutor needs to prove that Roger Ver's tax evasion 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 steps to conceal assets, underreport income, or deceive tax authorities. 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 there is no question about the authenticity and legality of the evidence related to these behaviors, it can be used as a powerful weapon for the prosecutor to successfully accuse.

According to reports, Roger Ver’s legal team has submitted a motion to a federal judge on December 4, 2024, hoping that the Trump administration will fulfill its promise to end strict encryption regulations and drop 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 accused the government of misconduct during the prosecution process, including selective quotation and interpretation of relevant communications out of context, and withholding evidence that may be beneficial to the defendants. In addition, they also believed that the prosecutors were suspected of selective enforcement of the law in this case and did not fairly hold accountable other similar cases, but 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.

Overall, Roger Ver's case success rate may be affected by many factors, including legal and political 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 accuse prosecutors of selective enforcement, which could undermine the legitimacy of IRS prosecutions if sufficient evidence is provided. At the same time, it is particularly noteworthy that the Trump administration intends to end the strict supervision of crypto assets. This political attitude may bring a turn for 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 politically neutral, 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 important for 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 renounced his U.S. citizenship and became a citizen of St. Kitts and Nevis in an attempt to use his offshore status to avoid U.S. tax obligations, a common tax avoidance method.

However, with the strengthening of international tax cooperation, the difficulty of avoiding taxes 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 the automatic exchange of financial tax-related information, including the British Virgin Islands, Cayman, Bermuda, and the Bahamas, which are regarded as "tax havens" Islands, Cook Islands and Marshall Islands, etc.

Taking the United States as an example, in recent years, the IRS has been gradually paying attention to the supervision of this type of tax avoidance and pursuing 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 tax authorities such as the IRS. 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, they may also trigger the country's overseas asset reporting obligations. For example, the U.S. FATCA Act requires declaration of global account assets, and failure to comply with this requirement may result in fines or even criminal charges.

**3.2 On-chain tracing technology upgrades, tax avoidance of hidden

transactions is restricted**

For high-net-worth Bitcoin investors like Roger Ver, tax authorities are focused on whether they can truthfully declare capital gains tax when selling large-scale assets.

Some high-net-worth investors may use on-chain anonymity technology or privacy coins (such as Monero and Zcash) to hide transactions, but with the advancement of on-chain tracking technology, the risks of this strategy have increased significantly. Advances in technological means have made transactions on the blockchain more transparent, and some tax authorities are able to 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 practice can easily be regarded as intentional tax evasion by the tax authorities, thus triggering 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. TaxDAO Tips and Suggestions

Despite the lessons learned by Roger Ver and others, some crypto-asset investors may underestimate the intensity of tax authorities’ 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. To ensure transaction compliance and avoid tax risks, investors in the crypto-asset sector should pay attention to:

First, pay attention to 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 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 policy developments and dynamically adjust investment strategies. Tax policy in the crypto-asset 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 policy changes can effectively avoid policy risks and ensure compliance.

Fourth, rely on professional support to avoid deviations in policy understanding. 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 policy requirements to help investors identify potential risks in advance. Especially when working in multiple jurisdictions, professional advice can help avoid compliance misunderstandings caused by policy misunderstandings.

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