IRS Pursuing Digital Currency Case Further

digital-currencyOnline.Gambling.org last reported on IRS vs Coinbase on December 15, 2016. At that time, the Internal Revenue Service had filed a motion with Northern California District Court Judge Jacqueline Scott Corley in an attempt to force Coinbase, a company similar to Bitcoin, to turn over customer data. Specifically, the IRS wanted identities and transaction histories of those that had purchased digital currency from the company in 2013-2015 because of suspicions of income tax evasion.

The judge had granted the request on behalf of the IRS and said, “Based upon a review of the Petition and supporting documents, the Court has determined that the “John Doe” summons to Coinbase, Inc. relates to the investigation of an ascertainable group or class of persons, that there is a reasonable basis for believing that such group or class of persons has failed or may have failed to comply with any provision of any internal revenue laws, and that the information sought to be obtained from the examination of the records or testimony (and the identities of the persons with respect to whose liability the summons is issued) are not readily available from other sources.”

Several days after that ruling, a Coinbase customer named Jeffrey Berns, who happens to be an attorney, filed a motion to set the Judge’s ruling aside. The premise being, that in so doing, the summons to Coinbase would be prevented from being issued. Even though Berns was not cited in the original summons, he petitioned the court as an “intervenor” which allowed him to become engaged in the legal process. Berns pointed out that customer data would be exposed to hackers because of the depth of overreach by the “John Doe” summons.

Now, the IRS has responded to Berns’s motion. On December 27, 2016, the IRS asked the court to dismiss Berns’s filing. They argued that since Berns identified himself as a Coinbase customer, he was no longer affected by the summons. The premise of the summons was “to produce information revealing the identity of certain unknown taxpayers.” And since Berns is now a known entity as it pertains to Coinbase customers, his motion is now moot. Therefore, the IRS wishes to proceed with their “John Doe” summons on customers of Coinbase.

The law firm of Berns Weiss responded with the following statement: “The IRS’s willingness to withdraw the subpoena as to Mr. Berns only because it is now aware of his identity makes it clear that the IRS does not have a legitimate purpose in seeking substantial personal and financial information concerning approximately 3 million Americans. The IRS summons that Mr. Berns is seeking to quash does not only request customer names, but also emails, account information, transaction history and a substantial amount of additional data. Now, in an attempt to prevent the Court from examining its motives in pursuing this unprecedented summons, the IRS seeks to avoid the motion filed by Mr. Berns merely because he has identified himself as a customer. The IRS has failed to explain why it is willing to withdraw the summons as to Mr. Berns, even though that means it will not obtain his personal and financial data from Coinbase. As the IRS is well aware, the purpose of the motion is to prevent the IRS from seeking significant private information concerning approximately 3 million Americans, not just Mr. Berns. Thus, as the IRS still cannot demonstrate any basis for seeking this information, we intend to continue to vigorously seek justice for all Coinbase customers.”

Meanwhile, Coinbase stated that their practice is “to cooperate with properly targeted law enforcement inquiries,” but for now, they will oppose the IRS efforts based on the “indiscriminate breadth of the government’s request.”

Stay tuned as Online.Gambling.org will continue to cover this story.

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