Judge Orders Kraken to Turn Over User Information to the IRS

Kraken has been ordered to turn over sensitive user information for clients that had transactions worth in total over $20,000 over the course of a year.

The tax agency said it wants to determine whether crypto investors have been cheating on their tax reports.

• The IRS filed the initial court petition in the Northern District of California earlier this year, claiming that it had previously issued summons to the exchange in 2021 that the latter ignored. The agency also said it wants to check for tax liabilities for users transacting in the aforementioned amount between 2016 and 2020.
• Now, Judge Joseph Spero ordered Kraken to turn over the required information, which includes the user’s name, pseudonyms, if any, taxpayer identification number, phone number, email and physical address, birthdate, etc.

“The Court must determine whether the Government’s summons is narrowly tailored, that is, whether it is ‘no broader than necessary to achieve its purpose.’ The Court finds that to the extent the first three requests are aimed at establishing the identities of the Kraken account holders who fall within the Doe definition, the information sought in these requests is much broader than what is necessary to achieve that purpose for the vast majority of Doe users.” – the Judge wrote.

• However, Judge Spero has seemingly rejected the IRS’ requests to receive more detailed information regarding the users’ source of wealth, employment data, etc.
• Kraken was among the first crypto entities to go under the regulatory scope of another US government agency – the Securities and Exchange Commission.
• A few months before the SEC went after Binance, Coinbase, and several digital assets, it reached an agreement with the veteran US exchange to halt its staking service and pay $30 million in disgorgement, prejudgment interest, and civil penalties.