Judge Orders Kraken to Turn Over User Information to the IRS – In response to a court order, Kraken, a cryptocurrency exchange, has been directed to provide the IRS with account and transaction information. The purpose of this request is for the IRS to investigate whether any users of the exchange have potentially misrepresented their tax obligations.
The IRS took legal action in the Northern District of California after Kraken reached a settlement with the U.S. Securities and Exchange Commission regarding allegations of violating securities law through its staking service. The IRS claimed that it had previously issued a summons to Kraken in 2021, which the exchange did not comply with, and is now seeking to examine tax liabilities of users who engaged in cryptocurrency transactions from 2016 to 2020.
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As per the recent order, Kraken is required to provide specific information about its users who conducted transactions exceeding $20,000 in a calendar year. The information includes the user’s name, birthdate, taxpayer identification number, address, phone number, email address, and various other documents. Additionally, Kraken must supply blockchain addresses and transaction hashes that are already included in the transaction data accessible to the exchange.
There is also a possibility that Kraken may need to provide raw data to the IRS. It seems that Judge Joseph Spero, who presided over the case, has rejected the IRS’s attempt to obtain employment information and details regarding the source of wealth from Kraken. The judge outright denied several of the IRS’s requests in this regard.
“The Court must determine whether the Government’s summons is narrowly tailored, that is, whether it is ‘no broader than necessary to achieve its purpose,'” the judge wrote in his analysis of some of the IRS’s requests. “The Court finds that to the extent the first three requests are aimed at establishing the identities of the Kraken account holders who fall within the Doe definition, the information sought in these requests is much broader than what is necessary to achieve that purpose for the vast majority of Doe users.”