Pierluigi Paganini November 30, 2017

A federal judge in the California court has ruled that cryptocurrency exchange portal Coinbase must hand over details of over 14,000 users to the US IRS.

In November 2016, the US Internal Revenue Service (IRS) has filed a motion asking the US Federal Court of Northern California to force the US-based cryptocurrency exchange portal to hand over the personal details of all US users that have conducted Bitcoin trades between January 1, 2013, and December 31, 2015.

The motion is part of a tax evasion investigation launched by the US authorities and aimed to track people that currently maintains funds in Bitcoin or that were paid using the cryptocurrency to avoid paying US taxes.

Now a federal judge in the California Northern district court has ruled that US-based cryptocurrency exchange portal Coinbase must hand over details of over 14,000 users to the US Internal Revenue Service (IRS). Coinbase must provide personal and financial details of its US users, including names, birth dates, addresses, Bitcoin wallet ID, tax ID numbers.

According to the IRS, during the period under investigation, only about 900 US citizens paid taxes for Bitcoin-related operations, even if Coinbase was serving millions of users, most of them from US.

In a first time judge rejected the IRS filing because the huge audience and its potential impact, but the US agency filed a new motion earlier November and judged decided that Coinbase would have to hand over the personal details of all US Coinbase users that have at least one account used in Bitcoin transactions greater than $20,000 worth of Bitcoin between January 1, 2013, and December 31, 2015.

According to Coinbase, it was now forced to hand over data belonging to 14,355 users, a small fraction of the nearly 500,000 users covered by the first motion.

“The government initially sought private financial records of approximately 500,000 account holders. In response to Coinbase’s continuing fight, the IRS significantly reduced the scope of the summons to approximately 14,000 customers. Although this 97% reduction in impacted customers is a big win for our customers, the IRS still took Coinbase to court to obtain a sweeping set of customer records. Today we argued, even as narrowed, the summons is still unjustified and invasive to our customers.” reads a blog post published by the company.

The list of 14,355 US users will not include citizens for which Coinbase filed 1099-K tax forms and users who only bought Bitcoin storing it in their accounts and never used it.

The message is clear, US authorities will try to persecute any tax-evasion activities that leverage crypto currencies to avoid controls.

Pierluigi Paganini

(Security Affairs – Coinbase, Bitcoin)

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