US court orders Kraken to turn over its users’ account info to IRS

A US court on June 30, 2023, ordered cryptocurrency exchange Kraken to submit details of its users’ accounts and other transactional data to the Internal Revenue Service (IRS). The agency has claimed that it needs the information to find out if Kraken’s users had underreported their tax liabilities.

The order was issued by Magistrate Judge Joseph Spero of the United States District Court for the Northern District of California. According to the order, Kraken will have to submit details of users who engaged in transactions worth more than $20,000 in a calendar year. 

The details sought by the IRS include users’ real names or pseudonyms, birth dates, addresses, phone numbers, email addresses, taxpayer identification numbers, and other documents.

Earlier in February this year, the IRS had filed a petition in the Northern Court of California. The US agency had claimed that it had issued summons to Kraken in 2021 as well but the exchange did not comply with the orders. Hence, the IRS now wants to probe the tax liabilities of Kraken’s users between 2016 and 2020.

Kraken is also required to turn over transaction hashes and blockchain addresses – which are among the transactional data that is already available for sharing. Experts believe that the decentralized exchange might also have to submit its raw data to the US revenue service.

Judge dismisses IRS’ attempt to seek information about Kraken’s source of wealth 

According to reports, Judge Spero dismissed IRS attempts to obtain information about Kraken’s employees and its source of wealth. While assessing some of the IRS’ requests, the judge ruled that the court should be able to ascertain if the IRS summons were appropriately focused and do not exceed the scope of its intended purpose.

He stated that as per the court’s findings, the information sought by IRS in its first three requests was to identify account holders that come under the ambit of the ‘Doe’ definition. The information requested by the agency was more than what is needed to establish users’ identities.

Judge Spero was of the view that the IRS’ demands can be justified as the number of taxpayers filing returns on Bitcoin-related investments was “dwarfed by the activity” that Kraken sees. The order underlined that Kraken had over 4 million clients who were involved in trades worth over $140 billion between 2011 and 2017. In addition, the crypto exchange was registering more than 50,000 new users every day, according to a Bloomberg report

The court observed that the IRS’ evidence indicates that under-reporting of taxes was higher where there is “no third-party information reporting” as was the case with Kraken.

Not Kraken’s first brush with the law in 2023

The June 30 court ruling isn’t Kraken’s first brush with the law this year. In February this year, the crypto exchange agreed to shut down its staking operations in the US and pay a $ 30 million fine in a settlement after the US Securities and Exchange Commission (SEC) alleged that it sold unregistered securities.

The SEC claimed that Kraken launched its staking programme without registering the offer or sale. CNBC had reported that the commission had claimed that US investors owned crypto assets worth more than $2.7 billion on Kraken which had fetched the exchange over $147 million in earnings. 

Kraken: The backstory

Kraken is among the most popular trading exchanges across the globe and is supported by more than 190 countries. With a quarterly trading volume that exceeds $270 billion, Kraken has emerged among the best sources of information on crypto assets. 

From insights like what is the best time of day to buy cryptocurrency to spot tokens for achieving a goal like how to make $100 a day with cryptocurrency, Kraken won over its users with its intuitive interface and cutting-edge features. 

The coin tracker was co-founded by Jesse Powell and Thanh Luu in 2011. Kraken has over 200 old and new crypto coins listed on its exchange. After serving as the exchange’s CEO for more than a decade, Powell stepped down and was replaced by the then Kraken COO Dave Ripley.

Disclaimer: This article was created for informational purposes only and should not be taken as investment advice. An asset’s past performance does not predict its future returns. Before making an investment, please conduct your own research, as digital assets like cryptocurrencies are highly risky and volatile financial instruments.

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