Kraken Gets Ordered By Court To Disclose User Data To IRS

By Kevin • July 3, 2023 6:56 pm • Comments

Crypto investors and traders should know that every time they use a crypto exchange, there is a chance that their data could be shared to other third parties.

Just recently, the United States District Court for the Northern District of California ordered the crypto exchange Kraken to share account transaction information to the IRS.

This would essentially force the exchange to reveal private customer information and is an attempt to collect as much taxes as possible.

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The order states that users who have engaged in more than $20,000 in transactions for the year must provide personal information such as tax IDs and other identity information.

This new order has caused a lot of negative feedback from the community as many see it as a forceful way of getting personal data that specifically targets the crypto industry.

CoinTelegraph reports:

In February, the IRS submitted a court petition in the Northern District of California shortly after Kraken reached a settlement with the U.S. Security Exchange Commission (SEC) over claims of securities law violations related to its staking service.

The IRS claimed that it had issued a summons to Kraken in 2021, which the exchange failed to comply with, and now seeks to investigate the tax obligations of users who conducted crypto transactions between 2016 and 2020.

Additionally, Kraken will be required to release blockchain addresses and transaction hashes, which are already included in the transaction data available for sharing.

The exchange may also be asked to provide raw data to the IRS.

This ruling from the court comes during a time where the SEC has been filing many other lawsuits against other crypto exchanges.

As a result, many who use crypto exchanges these days must be aware that there is always the possibility that their data will be shared as the government is focused on collecting taxes.

This may perhaps encourage many to start using decentralized exchanges from now on as these exchanges do not require users to submit any personal information.

Now that Kraken has been ordered by the court to share this info, it is very likely that all other exchanges would face the same issue in the future.

CoinDesk concludes:

Judge Joseph Spero, who oversaw the case, appears to have rejected the IRS’ effort to also receive employment information and source of wealth from Kraken. The judge denied several of the IRS’ requests outright.

“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 judge wrote in his analysis of some of the IRS’s requests.

“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.”

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