A federal court ordered crypto exchange Kraken to turn over account and transaction information to the Internal Revenue Service (IRS), which said it needed that information to see if any of the exchange’s users had underreported their taxes.
As per the order issued on Friday, June 30, Kraken is required to provide details of users who engaged in transactions exceeding $20,000 within a calendar year, including their names (real or pseudonyms), birthdates, taxpayer identification numbers, addresses, phone numbers, email addresses and various other documents.
In February, the IRS submitted a court petition in the Northern District of California shortly after Kraken reached a settlement with the United States Security Exchange Commission (SEC) over claims of securities law violations related to its staking service. The IRS claimed that it had issued a summons to Kraken in 2021, which the exchange failed to comply with, and now seeks to investigate potential tax obligations of users who conducted crypto transactions between 2016 and 2020.
Additionally, Kraken will be required to release blockchain addresses and transaction hashes, which are already included in the transaction data available for sharing. The exchange may also be asked to provide raw data to the IRS.
Judge Joseph Spero, who presided over the case, seems to have dismissed the IRS’ attempt to obtain employment information and source of wealth from Kraken. The judge outrightly denied several of the IRS’ requests.
In the judge’s assessment of certain IRS requests, he stated that the Court needs to ascertain if the government’s summons is appropriately focused, meaning it should not exceed what is necessary to accomplish its intended purpose.
According to the Court’s findings, the information sought in the first three requests, which aim to identify Kraken account holders falling within the Doe definition, is overly broad and exceeds what is necessary for the majority of Doe users to establish their identities.
Friday’s ruling siding with the government comes amid a deepening US crackdown on cryptocurrency. The Securities and Exchange Commission this month filed separate lawsuits accusing Coinbase of running an illegal exchange and alleging that Binance.US mishandled customer funds, misled investors and regulators and broke securities rules.