He also doesn't have to keep all of his wealth in this Roth IRA, just a percentage. And it clearly is a scalable strategy because lots of people are doing it.
What does not seem fair is that most people think you can only invest in stocks and bonds in an IRA. You go to a bank or brokerage to open an IRA account... They offer you mutual funds, etfs, stocks, bonds... not much else... No one ever tells you that you can do this a different way and invest in different ways... Why? It's just too complicated for most people...
https://trustprovident.com/self-directed-investing-in-a-limi...
Yes it does suck for the rest of us but if you have money you have good advisors that can construct this IRA and all of its transactions in a legitimate manner.
https://www.nolo.com/legal-encyclopedia/what-is-par-value-st...
I think he went the route of his IRA's investment llc membership units being assigned a super large assignment of income distribution vs his initial investment.
just guessing...
But so the way the article made it sound then is his IRA paid for the shares at par value ($1700 = 1700000 shares IIRC). Even though they were of course worth more than par value, so then he owes money to the company for the difference but if that wasn’t paid out of the IRA that would seem an incredible and surely illegal tax dodge so I don’t think that could be the case.
https://sdirahandbook.com/self-directed-ira-investing/fund-s...
it is in section: Need to Know #1: Prohibited Transactions
A Roth IRA is beneficial if positions are being changed (taxable events), because those taxes are deferred. For very long term holding, the benefit caps out at 20% in exchange for tying up the assets for decades.
He will eventually benefit, if the company is still valuable when he comes of retirement age, by avoiding the single long term capital gains hit he would otherwise pay. It'll be more of a story, then, if the stock is near an all time high value, but frankly, this is not a scalable investment strategy for the wealthy sheltering their wealth (which would be a more interesting story). This only worked because he has been an exceptionally prescient investor. This wouldn't be a good strategy for every startup founder, because even if the startup was mega-successful, the founders would not be rich until retirement.