It is currently illegal to invest your Roth IRA in companies you are an officer/directer etc. As Peter Thiel was CEO of PayPal copying his investment strategy would be illegal.
As far as I know, this hasn't changed; it was not permitted when he did it either. The argument is that all of the activity after this initial prohibited transaction would be impossible to unwind. The typically penalty for things like this is tainting the entire IRA, which just isn't practical at this magnitude.
Why not? If I mess up taxes in my IRA, not only do I have to pay them but I have to pay a penalty. But there's some amount over which it's just too big to figure out so we let it go?
Penalties generally apply to financial crimes so invalidating the IRA is hardly unreasonable. Prison is perfectly reasonable for large scale financial crimes like this.
However, unwinding this stuff is straightforward. Take the total gains as a percentage from the prohibited transactions and divide the IRA value by that much, then adjust for any future investments in the IRA.
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As far as I know, this hasn't changed; it was not permitted when he did it either. The argument is that all of the activity after this initial prohibited transaction would be impossible to unwind. The typically penalty for things like this is tainting the entire IRA, which just isn't practical at this magnitude.
Why not? If I mess up taxes in my IRA, not only do I have to pay them but I have to pay a penalty. But there's some amount over which it's just too big to figure out so we let it go?
Don't get me wrong, I 100% agree with you that based on the facts, it should happen.
But short of siezing all of his still-in-the-US assets, Thiel has $2B-worth-of-reasons to spend decades arguing this in court.
And the USG stands to gain 15% of 5 Billion plus penalties from this. That’s well worth the fight.
Penalties generally apply to financial crimes so invalidating the IRA is hardly unreasonable. Prison is perfectly reasonable for large scale financial crimes like this.
However, unwinding this stuff is straightforward. Take the total gains as a percentage from the prohibited transactions and divide the IRA value by that much, then adjust for any future investments in the IRA.