IRS Demands Kraken Customer Details But A Judge Pushes Back

The IRS demands Kraken customer details from all users that could have run afoul of tax laws but one judge thinks that the request is too broad at the moment so let’s read more in our latest cryptocurrency news.

The IRS demands Kraken customer details and seeks permission to access the customers’ accounts. The Department of Justice, Tax Division filed a court request to get more info about the customers of the San Francisco-based crypto exchange Kraken. The so-called John Doe summons, filed in the court demands Kraken to provide account details for all American taxpayers that held $20,000 at least, in crypto on the exchange from 2016 to 2020.

Judge Joseph Spero wasn’t ready to authorize the request which covers registration details and transaction history unless the government gives a good justification for it. Spero stated that the IRS has to “specifically address why each category of information sought is narrowly tailored to the IRS’s investigative needs, including whether requests for more invasive and all-encompassing categories of information could be deferred until after the IRS has reviewed basic account registration information and transaction histories.”

A summons is a tool that the IRS uses to conduct investigations when it doesn’t know the name or ID of the taxpayer. Then, the Judge can approve the summons if there’s a reasonable basis to presume that people broke the tax laws and this information is not accessible by other means. The Department of Justice announced that it obtained authorization to serve a summons against Circle that partnered with Coinbase on the USDC stablecoin which also applied to trading platform Poloniex that was purchased by Circle in 2018.

Back in 2016, the US District Court of the Northern District of California approved the John Doe Summons on Coinbase but the customers immediately filed motions to throw out the ruling before the exchange agreed to turn over the records from the group of 13,000 customers a few years ago.  A Kraken spokesperson noted:

“Kraken has not received a summons for client records. Kraken complies with the legal and regulatory requirements in all jurisdictions that we operate in. We carefully review all regulatory inquiries and provide responses in due course.”