Wyden Continues Opportunity Zone Oversight, Probes Possible Cryptocurrency Industry Exploitation of Program

Washington, D.C. – Senate Finance Committee Chair Ron Wyden, D-Ore., today continued his oversight of the Opportunity Zone program and whether it has achieved Republicans’ stated goals of encouraging investment and creating jobs in low-income communities.

Wyden is pressing cryptocurrency companies—Argo Blockchain and Redivider Blockchain—as well as Mr. Blake Christian, a Certified Public Accountant involved in cryptocurrency transactions, about their reported efforts to use the Opportunity Zone program to avoid taxes without significantly benefitting low-income communities.

Wyden wrote to Argo Blockchain: “I have long been concerned that the Opportunity Zone program may permit wealthy investors another opportunity to avoid billions of dollars in taxes without meaningfully benefitting the distressed communities the program was intended to help. Earlier this year, I launched an investigation into luxury real estate developments in Opportunity Zones that might shield wealthy investors from capital gains taxes in exchange for limited public benefit. I am similarly concerned by recent reports that companies involved in cryptocurrency mining may be seeking to avoid taxes without meaningfully benefitting distressed communities using the Opportunity Zone program. According to these reports, Argo Blockchain may have chosen to invest in locations based, in part, on their eligibility for the Opportunity Zone program.”

Wyden wrote to Redivider Blockchain: “Currently, the lack of safeguards or transparency measures in the Opportunity Zone program raise the possibility that taxpayers are simply subsidizing companies involved in cryptocurrency mining. In particular, I am concerned about comments you made in a recent Huffington Post interview, which described you as saying you ‘100%’ would have founded a data center business with or without opportunity zones, which calls into question what, if any, net public benefit Redivider Blockchain investments are providing.”

Wyden wrote to Mr. Blake Christian: “One of these reports attributed a statement to you in which you assert that some cryptocurrency mining investors ‘[have] just had this big windfall and invariably they’re looking for a way to save some money because they’re about to get drilled on short term capital gains taxes. And they want to keep rolling the dice.’ The article also reported that 15 or 20 of your clients ‘who have made money in the low seven-figures mining or trading cryptocurrency, have set up warehouses in opportunity zones full of powerful computers that solve equations in order to ‘mine’ cryptocurrency and lease the computing power to other customers.’ In addition, according to the same report, you believe that a client mining cryptocurrency in a South American country can qualify for a giant tax subsidy using an affiliated management company that is located in an Opportunity Zone.”

Text of the letter to Argo Blockchain follows:

Dear Mr. Wall:

As Chairman of the U.S. Senate Committee on Finance, which has jurisdiction over federal tax matters, I am investigating the operation and effects of Qualified Opportunity Funds (Opportunity Funds), investment vehicles organized for the purpose of investing in Qualified Opportunity Zones (Opportunity Zones). The Opportunity Zone program was established by Congress on a party line basis in 2017 and was intended “to spur economic development and job creation in distressed communities throughout the country and U.S. possessions by providing tax benefits to investors who invest eligible capital into these communities.” Given the lack of transparency and reporting requirements for Opportunity Funds, I am writing to request information about the organization, operation and economic impact of your activities in Opportunity Zones, including in Dickens County, Texas.

I have long been concerned that the Opportunity Zone program may permit wealthy investors another opportunity to avoid billions of dollars in taxes without meaningfully benefitting the distressed communities the program was intended to help. Earlier this year, I launched an investigation into luxury real estate developments in Opportunity Zones that might shield wealthy investors from capital gains taxes in exchange for limited public benefit. I am similarly concerned by recent reports that companies involved in cryptocurrency mining may be seeking to avoid taxes without meaningfully benefitting distressed communities using the Opportunity Zone program. According to these reports, Argo Blockchain may have chosen to invest in locations based, in part, on their eligibility for the Opportunity Zone program.

Currently, the lack of safeguards and transparency measures in the Opportunity Zone program raise the possibility that taxpayers are simply subsidizing companies involved in cryptocurrency mining. There is currently no requirement that such companies demonstrate the benefit they are providing to low income-communities they claim to help. Accordingly, I have introduced legislation to reform the Opportunity Zone program, including requiring annual, public information reporting from Opportunity Funds, and annual statements to the IRS from fund investors. This legislation would also tighten existing rules to ensure that these incentives support new investments and do not provide tax-free gains for investments in projects that were already underway.

Given these concerns and the lack of information being provided by participants in the Opportunity Zone program to federal regulators, I request that you provide the following information and documents about the organization and operation of Argo Blockchain’s investment in an Opportunity Zone in Dickens County, Texas, and any other investments that Argo Blockchain has made in an Opportunity Zone:

1. Please list all projects in an Opportunity Zone that Argo Blockchain is currently invested in and provide the following information for each project:

a. which Opportunity Zone the project is located in;

b. how much money is invested in the project;
c. how many temporary jobs the project will create; and,
d. how many permanent jobs the project will create.

2. For each project listed in response to question one, please explain:

a. how and when you conceived or learned of the project;
b. if you chose the site of the project, how you selected it;
c. the extent to which your investments in other projects were redirected to the project because the project is in an Opportunity Zone;
d. how long after the date of your investment you intend to maintain the investment; and,
e. what tax benefits you expect to receive as a result of the project’s eligibility for the Opportunity Zone program.

3. For each project listed in response to question one, please indicate if prior to December 22, 2017—with or without the involvement of Argo Blockchain or investors in Argo Blockchain—to the best of your knowledge:

a. any party created any fixed record of the project’s conception (e.g., MOUs, business plans, renderings, drafts of designs or plans, etc.), and, if so, please provide copies of any such fixed records you possess;
b. any party had sought or received capital investment for the project;
c. any party had solicited investors or customers for the project;
d. any party had commenced formal planning for any construction related to the project; or,
e. any party had begun construction related to the project.

4. For each project listed in response to question one, please indicate if you advocated—either directly or indirectly using any medium—for the nomination by public officials of the Opportunity Zone in which the project is located.

a. For each project which you did advocate for inclusion of the project in a Opportunity Zone, whether or not the Opportunity Zone you advocated for was ultimately nominated, please explain when, how, and to which public officials you advocated, and provide copies of any written communications relevant to the advocacy.

5. For any cryptocurrency mining project potentially eligible for the Opportunity Zone program that Argo Blockchain is currently invested in, please provide the following information for each project:

a. the total number of investors that could potentially benefit, directly or indirectly, from the project’s eligibility for the Opportunity Zone program; and,

b. the number of American persons, American entities, foreign persons, and foreign entities of which that that total number of investors is comprised.

Text of the letter to Redividir Blockchain:

Dear Mr. Frazier:

As Chairman of the U.S. Senate Committee on Finance, which has jurisdiction over federal tax matters, I am investigating the operation and effects of Qualified Opportunity Funds (Opportunity Funds), investment vehicles organized for the purpose of investing in Qualified Opportunity Zones (Opportunity Zones). The Opportunity Zone program was established by Congress on a party line basis in 2017 and was intended “to spur economic development and job creation in distressed communities throughout the country and U.S. possessions by providing tax benefits to investors who invest eligible capital into these communities.” Given the lack of transparency and reporting requirements for Opportunity Funds, I am writing to request information about the organization, operation and economic impact of Redivider Blockchain Opportunity Zone Fund LLC (Redivider Blockchain).

I have long been concerned that the Opportunity Zone program may permit wealthy investors another opportunity to avoid billions of dollars in taxes without meaningfully benefitting the distressed communities the program was intended to help. Earlier this year, I launched an investigation into luxury real estate developments in Opportunity Zones that might shield wealthy investors from capital gains taxes in exchange for limited public benefit. I am similarly concerned by recent reports that companies involved in cryptocurrency mining may be seeking to avoid taxes without meaningfully benefitting distressed communities using the Opportunity Zone program. According to marketing materials, Redivider Blockchain owns a majority stake of a company that builds data centers in Opportunity Zones as well as a minority stake in a Bitcoin mining company that uses those data centers.

Currently, the lack of safeguards or transparency measures in the Opportunity Zone program raise the possibility that taxpayers are simply subsidizing companies involved in cryptocurrency mining. In particular, I am concerned about comments you made in a recent Huffington Post interview, which described you as saying you “100%” would have founded a data center business with or without opportunity zones, which calls into question what, if any, net public benefit Redivider Blockchain investments are providing.

There currently is no requirement that such companies demonstrate the benefit they are providing to low income-communities they claim to help. Accordingly, I have introduced legislation to reform the Opportunity Zone program, including requiring annual, public information reporting from Opportunity Funds, and annual statements to the IRS from fund investors. This legislation would also tighten existing rules to ensure that these incentives support new investments and do not provide tax-free gains for investments in projects that were already underway.

Given these concerns and the lack of information being provided by participants in the Opportunity Zone program to federal regulators, I request that you provide the following information and documents about the organization and operation of Redivider Blockchain’s investments in Opportunity Zones:

1. Please list all projects in an Opportunity Zone that Redivider Blockchain is currently invested in and provide the following information for each project:

a. which Opportunity Zone the project is located in;

b. how much money is invested in the project;

c. how many temporary jobs the project will create; and,

d. how many permanent jobs the project will create.

2. For each project listed in response to question one, please explain:

a. how and when you conceived or learned of the project;
b. if you chose the site of the project, how you selected it;
c. the extent to which your investments in other projects were redirected to the project because the project is in an Opportunity Zone;
d. how long after the date of your investment you intend to maintain the investment; and,
e. what tax benefits you expect to receive as a result of the project’s eligibility for the Opportunity Zone program. 

3. For each project listed in response to question one, please indicate if prior to December 22, 2017—with or without the involvement of Redivider Blockchain or investors in Redivider Blockchain—to the best of your knowledge:

a. any party created any fixed record of the project’s conception (e.g., MOUs, business plans, renderings, drafts of designs or plans, etc.), and, if so, please provide copies of any such fixed records you possess;
b. any party had sought or received capital investment for the project;
c. any party had solicited investors or customers for the project;
d. any party had commenced formal planning for any construction related to the project; or,
e. any party had begun construction related to the project.

4. For each project listed in response to question one, please indicate if you advocated—either directly or indirectly using any medium—for the nomination by public officials of the Opportunity Zone in which the project is located.

a. For each project which you did advocate for inclusion of the project in a Opportunity Zone, whether or not the Opportunity Zone you advocated for was ultimately nominated, please explain when, how, and to which public officials you advocated, and provide copies of any written communications relevant to the advocacy.

5. For any cryptocurrency mining project potentially eligible for the Opportunity Zone program that Redivider Blockchain is currently invested in, please provide the following information for each project:

a. the total number of investors that could potentially benefit, directly or indirectly, from the project’s eligibility for the Opportunity Zone program; and,
b. the number of American persons, American entities, foreign persons, and foreign entities of which that that total number of investors is comprised.

Text of the letter to Mr. Blake Christian follows:

Dear Mr. Christian:

As Chairman of the U.S. Senate Committee on Finance, which has jurisdiction over federal tax matters, I am investigating the operation and effects of Qualified Opportunity Funds (Opportunity Funds), investment vehicles organized for the purpose of investing in Qualified Opportunity Zones (Opportunity Zones). The Opportunity Zone program was established by Congress on a party line basis in 2017 and was intended “to spur economic development and job creation in distressed communities throughout the country and U.S. possessions by providing tax benefits to investors who invest eligible capital into these communities.” Given the lack of transparency and reporting requirements for Opportunity Funds, I am writing to request information about the organization, operation and economic impact of your activities in Opportunity Zones, including in Dickens County, Texas.

I have long been concerned that the Opportunity Zone program may permit wealthy investors another opportunity to avoid billions of dollars in taxes without meaningfully benefitting the distressed communities the program was intended to help. Earlier this year, I launched an investigation into luxury real estate developments in Opportunity Zones that might shield wealthy investors from capital gains taxes in exchange for limited public benefit. I am similarly concerned by recent reports that companies involved in cryptocurrency mining may be seeking to avoid taxes without meaningfully benefitting distressed communities using the Opportunity Zone program.

One of these reports attributed a statement to you in which you assert that some cryptocurrency mining investors “[have] just had this big windfall and invariably they’re looking for a way to save some money because they’re about to get drilled on short term capital gains taxes. And they want to keep rolling the dice.” The article also reported that 15 or 20 of your clients “who have made money in the low seven-figures mining or trading cryptocurrency, have set up warehouses in opportunity zones full of powerful computers that solve equations in order to ‘mine’ cryptocurrency and lease the computing power to other customers.” In addition, according to the same report, you believe that a client mining cryptocurrency in a South American country can qualify for a giant tax subsidy using an affiliated management company that is located in an Opportunity Zone.

Currently, the lack of safeguards and transparency measures in the Opportunity Zone program raise the possibility that taxpayers are simply subsidizing companies involved in cryptocurrency mining. There is currently no requirement that such companies demonstrate the benefit they are providing to low income-communities they claim to help. Accordingly, I have introduced legislation to reform the Opportunity Zone program, including requiring annual, public information reporting from Opportunity Funds, and annual statements to the IRS from fund investors. This legislation would also tighten existing rules to ensure that these incentives support new investments and do not provide tax-free gains for investments in projects that were already underway.

Given these concerns and the lack of information being provided by participants in the Opportunity Zone program to federal regulators, I request that you provide the following information and documents about the organization and operation of your clients’ investments in cryptocurrency mining projects in Opportunity Zones:

1. Please list all cryptocurrency mining projects located outside the United States that your clients are currently invested in that you believe may qualify for the Opportunity Zone program. Please provide the following information for each project:

a. the foreign country in which the physical cryptocurrency mining infrastructure and devices associated with the project are located;
b. the Opportunity Zone in which the project could qualify for eligibility in the Opportunity Zone program; and,
c. the reportedly “baroque” accounting through which the project could qualify for eligibility in the Opportunity Zone program.

2. Please list all cryptocurrency mining projects in Opportunity Zones that your clients are currently invested in and provide the following information for each project:

a. which Opportunity Zone the project is located in;
b. how much money is invested in the project;
c. how many temporary jobs the project will create; and,
d. how many permanent jobs the project will create.

3. For each project listed in response to question two, please explain to the best of your knowledge:

a. how and when your client conceived or learned of the project;
b. if your client chose the site of the project, how your client selected it;
c. the extent to which your client’s investments in other projects were redirected to the project because the project is in an Opportunity Zone;
d. how long after the date of your client’s investment your client intends to maintain the investment; and,
e. what tax benefits your client expect to receive as a result of the project’s eligibility for the Opportunity Zone program. 

4. For each project listed in response to question two, please indicate if prior to December 22, 2017—with or without the involvement of your client—to the best of your knowledge:

a. any party created any fixed record of the project’s conception (e.g., MOUs, business plans, renderings, drafts of designs or plans, etc.), and, if so, please provide copies of any such fixed records you possess;
b. any party had sought or received capital investment for the project;
c. any party had solicited investors or customers for the project;
d. any party had commenced formal planning for any construction related to the project; or,
e. any party had begun construction related to the project.

5. For each project listed in response to question two, please indicate if you advocated—either directly or indirectly using any medium—for the nomination by public officials of the Opportunity Zone in which the project is located.

a. For each project which you did advocate for inclusion of the project in a Opportunity Zone, whether or not the Opportunity Zone you advocated for was ultimately nominated, please explain when, how, and to which public officials you advocated, and provide copies of any written communications relevant to the advocacy.

6. For each project listed in response to question two, please provide the following information for each project:

a. the total number of investors that could potentially benefit, directly or indirectly, from the project’s eligibility for the Opportunity Zone program; and,
b. the number of American persons, American entities, foreign persons, and foreign entities of which that that total number of investors is comprised.

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