The IRS claimed it needed the account and transaction information to determine whether any of the exchange’s users had underreported their taxes, and a federal court ordered Kraken to provide it.In February, just after the cryptocurrency exchange reached a settlement with the U.S. Securities and Exchange Commission on allegations that its staking service violated securities law, the IRS filed a court petition in the Northern District of California.The tax enforcer claimed to be attempting to determine whether users who transacted in cryptocurrencies between 2016 and 2020 had any tax responsibilities after issuing a summons to Kraken in 2021, which the exchange allegedly ignored.
The court’s order, which was issued on Friday, requires Kraken to provide information about users who made over $20,000 in transactions during a calendar year, including the user’s name (and any pseudonyms), birthdate, taxpayer identification number, address, phone number, email address, and a variety of other documents.Along with the transaction hashes and blockchain addresses that are currently included in the transaction data that Kraken can supply, the exchange may also produce raw data for the IRS.
Judge Joseph Spero, who presided over the case, appears to have denied the IRS’ request to get from Kraken details about Kraken’s employment and source of money.The judge flatly rejected a number of the IRS’s requests.The judge said in his consideration of some of the IRS’s requests, “The Court must decide whether the Government’s summons is narrowly tailored, that is, whether it is “no broader than necessary to achieve its goal.”“The Court finds that the information sought in the first three requests is much broader than what is necessary to achieve that purpose for the vast majority of Doe users, to the extent the first three requests are intended to establish the identities of the Kraken account holders who fall within the Doe definition.”
Spokespeople for Kraken didn’t immediately respond to a request for comment on the court’s decision.