In short
- The IRS received the approval of a judge to review Circle’s customer records.
- He is looking for similar permission to access some Kraken customer accounts.
- The judge thinks the government’s request is too broad at the moment.
The Department of Justice, Tax Division, this week filed a court order to obtain information about customers of the San Francisco-based Kraken cryptocurrency exchange.
The so-called John Doe subpoena, filed with the U.S. District Court for the Northern District of California, asks Kraken to provide account details to all American taxpayers who kept at least $ 20,000 in cryptocurrency on the exchange at any time from 2016 to 2020.
Judge Joseph Spero is not ready to authorize the request, which would cover registration details and transaction history, unless the government justifies it.
Judge Spero stated that the IRS “must specifically address why each category of information sought is strictly tailored to the IRS’s investigative needs, including whether requests for more invasive and comprehensive categories of information could be postponed until after the IRS has reviewed the basic account registration and transaction history and information. “
A John Doe subpoena is a tool that the Internal Revenue Service (IRS) can use to conduct investigations when it does not know the name or identity of the taxpayer. A judge can approve the subpoena, as long as there is a reasonable basis for assuming that a group of people may have violated tax laws and that information cannot be accessed by other means. (The Department of Justice, Tax Division, works with the IRS and is responsible for enforcing IRS subpoenas.)
Yesterday, the Justice Department announced that it had obtained authorization to deliver a subpoena against Circle Internet Financial, a partner of Coinbase in USDC stablecoin. The subpoena also applies to the Poloniex trading platform, which Circle bought in 2018 and which later split from the company.
These orders are hardly new for cryptocurrency exchanges.
In 2016, the U.S. District Court for the Northern District of California passed a John Doe subpoena in Coinbase. But Coinbase’s and Coinbase’s clients filed several motions to reject the decision before Coinbase finally agreed to deliver customer records for “a group of approximately 13,000 customers” in 2018.
A spokesman for Kraken said Decrypt: “Kraken has not received a subpoena for customer records. Kraken complies with legal and regulatory requirements in all jurisdictions in which we operate. We carefully review all regulatory inquiries and provide responses in due time.”