US v Payward Ventures, Inc., 23-mc-80029-JCS
This post is part of our series on recent important tax cases that may be of interest to accounting, tax, and finance professionals. For more like this, see our Federal Tax Update and California Federal Tax Update, which offer a comprehensive analysis of the year’s most pivotal tax developments.
Kraken Must Comply with Summons for Customer Crypto Transactions (US v Payward Ventures, Inc., 23-mc-80029-JCS (ND Cal. (Jun. 30, 2023))
On March 30, 2021, Payward Ventures, Inc., doing business as Kraken.com, was issued a summons for relevant information on cryptocurrency transactions by Kraken’s customers for the years 2016 through 2020. After Kraken failed to comply with the summons, the Government filed a petition to enforce the summons. The Court agreed that parts of the summons were overly broad. The Court ordered Kraken to produce the following documents for Kraken users with any combination of accounts having at least the equivalent of $20,000 in value of transactions (regardless of type) in cryptocurrency in any one year, for the period Jan. 1, 2016, through Dec. 31, 2020:
- Name (including full name, any pseudonym, or any user ID);
- Date of Birth;
- Taxpayer Identification Number;
- Physical Address;
- Telephone Number;
- Email Address; and
- All transactional ledgers for the periods at issue.
Tax practitioner planning. The order to comply means that the IRS will be looking at unreported Kraken transactions in the next year or two.
“John Doe” Summons Issued to SFOX and Circle Virtual Currency Exchanges
On Aug. 15, 2022, a federal court in the Central District of California authorized the IRS to serve a John Doe summons to OX Labs Inc. (DBA SFOX). SFOX is a cryptocurrency prime dealer for professional traders and institutional investors and has over 175,000 registered users.
On Apr. 1, 2021, a federal court in the District of Massachusetts approved an IRS summons to the payments company known as Circle and its affiliates to turn over customer records to the agency.
Note. Coinbase received a “John Doe” summons in 2016. Circle received a “John Doe” summons in 2021. OX Labs Inc. (DBA SFOX) received a “John Doe” summons in 2022.