The U.S. Internal Revenue Service (IRS) has been granted the authority to issue a 'John Doe' summons to M.Y. Safra Bank, a court in New York ruled on Thursday. The summons will oblige the bank to produce information about customers who may have failed to report and pay taxes on crypto transactions through prime dealer SFOX.
In its petition in support of the summons, the IRS pointed to “significant tax compliance deficiencies” related to cryptocurrency transactions made through the SFOX platform.
“Taxpayers who transact with cryptocurrency should understand that income and gains from cryptocurrency transactions are taxable,” U.S. Attorney Damian Williams said in a statement, adding that the information sought by the summons “will help to ensure that cryptocurrency owners are following the tax laws.”
DOJ, IRS Target Tax-Evading Clients of Crypto Broker SFOX
A California court has given the U.S. Internal Revenue Service permission to issue a “John Doe” summons to prime brokerage SFOX. If issued, the summons would seek both user identification and transaction records for anyone who completed at least $20,000 worth of transactions from 2016 through the end of 2021. In a memo about the SFOX summons, Hubbert wrote that IRS Agent Seng Lee has identified 10 different taxpayers believed to be SFOX customers who are suspected of skirting tax laws. Those ta...
SFOX, which has over 175,000 registered users who have collectively undertaken more than $12 billion in transactions since 2015, connects crypto exchanges, over-the-counter (OTC) virtual currency brokers, and liquidity providers.
M.Y. Safra Bank partnered with SFOX in 2019 to offer its customers cash deposit accounts backed by the Federal Deposit Insurance Corporation, with users being able to use those accounts to buy and sell digital assets.
“The government’s ability to obtain third-party information on those failing to report their gains from digital assets remains a critical tool in catching tax cheats,” said IRS Commissioner Charles Rettig.
According to Rettig, the court decision to grant the summons “reinforces our ongoing, significant efforts to ensure that everyone pays their fair share.”
“Taxpayers earning income from digital asset transactions need to come into compliance with their filing and reporting responsibilities,” he added.
[ad-block /]
IRS hunts crypto tax evaders
This is not the first time a U.S. court has granted the IRS the right to collect the data of customers involved in cryptocurrency transactions.
In August this year, a California court’s ruling authorized the U.S tax agency to serve a summons against SFOX, asking for information about any "U.S. taxpayers who conducted at least the equivalent of $20,000 in transactions in cryptocurrency between 2016 and 2021 with or through SFOX.”
Some individuals included in a petition included a person who was “allegedly involved in a Ponzi scheme” and received approximately $1 million in deposits through SFOX, but did not report it to the IRS in 2016, 2017, or 2018. Other people allegedly deposited thousands of dollars worth of Bitcoin and other cryptocurrency in SFOX accounts, exchanged it for dollars, transferred the money to personal bank accounts, and then failed to report any gain or loss from the transactions.
IRS Wants Kraken Customer Details, Judge Pushes Back
The Department of Justice, Tax Division, this week filed a court request to obtain information about customers of the San Francisco-based cryptocurrency exchange Kraken. The so-called John Doe summons, filed in the US District Court for the Northern District of California, asks Kraken to provide account details for all American taxpayers who have held at least $20,000 in cryptocurrency on the exchange at any point from 2016 to 2020. Judge Joseph Spero isn't ready to authorize the request, which...
In 2017, courts gave the IRS permission to issue a 'John Doe' summons to crypto exchange Coinbase. That resulted in the company sharing information on approximately 14,000 of its users.
In April last year, courts again approved 'John Doe' summons issued to crypto exchange Kraken and Circle, the issuer of the stablecoin USDC.
