He bought 1.7 million founders' shares of Paypal (then Confinity, which he cofounded and was CEO of at the time) for under $2000. These are terms you would never offer to an investor, that you'd never offer to an employee.
For comparison, the SEC filing for Paypal's IPO has Thiel Capital investing a bridge loan of $100k in 1998 which was then converted into 500 thousand shares (100x higher valuation than his individual "purchase" the following month).
From the ProPublica article, re: why this was problematic:
> Thiel’s unusual stock purchase risked running afoul of rules designed to prevent IRAs from becoming illegal tax shelters. Investors aren’t allowed to buy assets for less than their true value through an IRA. The practice is sometimes known as “stuffing” because it gets around the strict limits imposed by Congress on how much money can be put in a Roth.
Longstanding underfunding of the IRS, if I had to guess? It's much more expensive and time-consuming to go after wealthy tax cheats than, say, people incorrectly claiming the earned income tax credit. The ProPublica article states that Thiel was indeed audited in 2011, but the audit was eventually closed with no known outcome.
For comparison, the SEC filing for Paypal's IPO has Thiel Capital investing a bridge loan of $100k in 1998 which was then converted into 500 thousand shares (100x higher valuation than his individual "purchase" the following month).
https://www.sec.gov/Archives/edgar/data/1103415/000091205702...
From the ProPublica article, re: why this was problematic:
> Thiel’s unusual stock purchase risked running afoul of rules designed to prevent IRAs from becoming illegal tax shelters. Investors aren’t allowed to buy assets for less than their true value through an IRA. The practice is sometimes known as “stuffing” because it gets around the strict limits imposed by Congress on how much money can be put in a Roth.