Bitcoin Pioneer Arrested in Spain on US Warrant for Tax Evasion 10 Years After He Renounced

Bitcoin pioneer Roger Ver is being held in Spain on a US arrest warrant. He faces extradition to the US on charges of tax evasion. The charges relate to his renunciation of US citizenship ten years ago when he became a St Kitts and Nevis citizen.

Anyone renouncing US citizenship with substantial assets is obligated to pay an exit tax to the US government. This tax is levied on the gains of all your assets as if they had been sold at the time of citizenship renunciation. This can be a significant financial consideration.

The US claims that Ver failed to disclose the full value of his Bitcoin holdings. They allege that he failed to pay $48m in US taxes.

According to the indictment, the IRS used blockchain analytics to track Ver’s Bitcoin holdings. Ver owned 131,000 bitcoins either directly or through his companies. This method, also known as clustering analysis, is being used increasingly in tax evasion and money laundering cases to track crypto holdings.

While much is being made of Ver’s arrest as an attack on the crypto world, the US regularly goes after high-net-worth individuals who renounce. They also have form for using the threat of extradition to extract substantial settlements.

A similar case occurred in 2019 when former Russian oligarch Oleg Tinkov was indicted by the US on charges of tax evasion. Tinkov, who had renounced his US citizenship in 2013, was accused of failing to report his income and assets worth over $1 billion. He faced up to six years in prison and a $75 million fine. Tinkov, who was living in London, was arrested by British authorities on a US extradition request. However, in 2020, he reached a settlement with the IRS and agreed to pay $500 million in taxes to avoid extradition and prosecution. Tinkov claimed that he had a rare form of leukemia and needed to stay in the UK for treatment.

The tech entrepreneur John Mcafee was also arrested in Spain on charges related to crypto trading. He died in prison in Spain while fighting against extradition to the US.

Roger Ver was likely aware that he was facing a US indictment for some time. It’s puzzling that he would choose to be in Spain, where he could easily be snatched by the US. In most countries, tax evasion is not an extraditable offense. However, Spain is known for aggressively pursuing those who break its own tax laws, so it’s likely to cooperate with US authorities in the extradition of Ver.

One possible outcome of the Ver case is that the IRS will negotiate a settlement with him to avoid a lengthy and costly extradition process. The IRS may be willing to accept a substantial fine from Ver, similar to the $500 million that Tinkov paid, in exchange for dropping the criminal charges. This way, the IRS could recover some of the taxes they claim Ver owes and send a message to other crypto investors. Ver may also prefer to settle the case rather than risk being extradited to the US and facing prison time. However, the settlement would depend on Ver’s willingness to cooperate and disclose his assets. He may be reluctant to do so given his libertarian views and distrust of the US government. However, he may have no choice if he’s stuck in a Spanish prison.

The takeaway from this case is that renouncing US citizenship is no guarantee that the US government won’t pursue you years later. Roger Ver seems to have made the same error as John Mcafee in assuming that he could travel freely outside the US because he was not using a US passport. In both cases, the problems could easily have been avoided with more careful planning.

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