Coinbase User Asks Federal Court to Stop IRS Bitcoin Subpoena

Stan Higgins (@mpmcsweeney) | Published on December 14, 2016 at 19:39 GMT

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A Coinbase customer has gone to court to stop the Internal Revenue Service from subpoenaing user data from the bitcoin and ether exchange startup.

According to new filings dated 13th December, Los Angeles-based lawyer Jeffrey Berns has disputed the legitimacy of the IRS effort to obtain two years’ worth of user records. The IRS pursuit of a ‘John Doe’ summons, begun last month, was approved by US Judge Jacqueline Scott Corley on 30th November.

Berns – who is being represented by the firm for which he is a managing partner, according toLinkedIn – is asking the court to invalidate its previous approval, or, alternatively, to put in place a protective order to stop the effort in its tracks. He argued that the John Doe summons “would constitute an abuse of process” and blasted the document request proposed by the US tax agency as “overbroad”.

Lawyers for Berns argued that the filing wasn’t the result of an effort to protect himself from any kind of tax investigation, writing:

“Instead, Movant’s intent is to protect the interests of all of Coinbase’s customers who are subject to this overbroad summons, even though the IRS has made no showing that any of them have engaged in suspect tax-avoidance conduct.”

When reached for comment, Berns Weiss representatives said the filing was, ultimately, submitted in support of users of Coinbase that could be subject to IRS scrutiny.

"While Coinbase has a business interest in protecting its customers’ private information, it also has a business interest in not being adversarial with government regulators," the firm said. "Further, to the extent that there may be a negotiation with the government regarding a possible agreement for the production of a subset of the information sought by the Summons, Coinbase’s customers should be fully represented in any such negotiation."

Coinbase, when reached, said that it was aware Berns' effort.

“We are aware of the motion to intervene filed today by Jeffrey K. Berns in the IRS petition. We are tracking all court proceedings and look forward to engaging the IRS,” the company said in a statement. “We will keep our customers updated on any significant developments with respect to Coinbase's engagement on this matter.”

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Coinbase.

The full motion to intervene can be found below:

Notice of Motion and Motion to Intervene by CoinDesk on Scribd

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A Judge Just Cleared the Way for the IRS to Seek Coinbase Customer Data

Stan Higgins (@mpmcsweeney) | Published on November 30, 2016 at 22:41 GMT

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The IRS can now serve bitcoin and ether exchange startup Coinbase with a summons for information about its users, a federal judge ruled today.

In an order dated 30th November, Judge Jacqueline Scott Corley sided with a request filed earlier this month by the IRS as part of its bid to investigate alleged tax violations in the US pertaining or connected to digital currency use.

When reached for comment, Coinbase said that it expected the order and that it would release a formal statement.

The company later said:

"We are aware of, and expected, the court’s ex parte order today. We look forward to opposing the DOJ’s request in court after Coinbase is served with a subpoena. As we previously stated, we remain concerned with our US customers’ legitimate privacy rights in the face of the government’s sweeping request."

Following the issuance of the court order, the US government celebrated the development.

"Transactions in virtual currency are taxable just like those in any other property. The John Doe summons is a step designed to help the IRS ensure people doing business in the emerging economy are following the tax laws and meeting their responsibilities," IRS Commissioner John Koskinen said.

The IRS is seeking Coinbase user records from between 31st December, 2013 and 31st December, 2015. The startup said after the agency’s initial filing that it would oppose the effort.

Since mid-2015, the IRS has considered bitcoin and other digital currencies as kinds of taxable property. A recent report from the agency’s inspector general, however, blasted the IRS for a failure to develop a cohesive strategy for digital currency taxation – something that tax professionals have criticized it for as well.

This article has been updated with comment from Coinbase.

The full court order can be found below:

Order by CoinDesk on Scribd

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Coinbase.

Image via Shutterstock

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