The United States District Court for the Northern District of California has issued an order directing cryptocurrency exchange Kraken to disclose account and transaction information to the Internal Revenue Service (IRS).
The court order comes as part of the IRS’s efforts to ensure tax compliance and investigate potential underreporting of taxes by Kraken users. In this article, we delve into the details of the court order and its implications for both Kraken and its users.
As per the court order issued on June 30, Kraken is required to furnish detailed information about users who engaged in transactions exceeding $20,000 within a calendar year.
This information includes names (real or pseudonyms), birthdates, taxpayer identification numbers, addresses, phone numbers, email addresses, and other relevant documents.
Furthermore, the exchange may be asked to provide blockchain addresses, transaction hashes, and even raw data to the IRS.
The IRS initiated its investigation by filing a court petition after Kraken settled with the U.S. Securities and Exchange Commission (SEC) over allegations of securities law violations related to its staking service.
The IRS claims that it previously issued a summons to Kraken in 2021, which the exchange failed to comply with, prompting the agency to seek further information on the tax obligations of users who conducted crypto transactions between 2016 and 2020.
Judge Joseph Spero, presiding over the case, evaluated the IRS’s requests and dismissed certain demands, such as employment information and source of wealth from Kraken.
The judge emphasized the need for the government’s summons to be appropriately focused, ensuring that it does not exceed what is necessary to achieve its intended purpose.
The court found that some of the IRS’s requests, particularly those related to identifying Kraken account holders, were overly broad and surpassed the information required for establishing users’ identities.
