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IRS Obtains Summons Approval for Cryptocurrency Traders of Kraken

Offshore Account Update

Posted on November 17, 2023 |

In its efforts to crack down on cryptocurrency-related tax evasion, the Internal Revenue Service (IRS) has relied heavily on “John Doe” summonses in recent years. These summonses require cryptocurrency exchanges and other intermediaries to turn over their customers’ information to the agency—even though the agency doesn’t know whether these customers have committed a crime.

Recently, the IRS secured a significant victory when a federal court granted the agency’s motion to enforce a “John Doe” summons that it issued to Kraken in 2021. As a result, many Kraken customers may soon face IRS criminal tax audits carrying the potential for substantial penalties.

IRS Prevails in Long-Running Battle to Secure Kraken Customers’ Information

The IRS’ efforts to obtain Kraken customers’ information began more than two years ago. On May 5, 2021, the IRS secured court approval to serve a “John Doe” summons on Payward Ventures Inc. and its subsidiaries, doing business as Kraken. Under the summons, Kraken was supposed to provide the IRS with information about U.S. taxpayers who conducted “ at least the equivalent of $20,000 in transactions in cryptocurrency during the years 2016 to 2020.”

However, Kraken refused to comply. Instead, it challenged the IRS' summons in court—and it was able to avoid compliance until earlier this year. On June 30, 2023, the same federal court that authorized the summons issued an order compelling compliance, requiring Kraken to produce the following information for U.S. taxpayers covered under the summons:

  • Name
  • Birth date
  • Taxpayer identification number
  • Physical address
  • Telephone number
  • Email address
  • Customer transaction records

According to the IRS’ petition seeking enforcement, this information “will produce leads to help it identify U.S. taxpayers that have transacted in cryptocurrency at the specified floor level through Kraken at any time during the period specified in the John Doe summons and who may have failed to report such transactions in compliance with internal revenue laws.” In other words, the IRS intends specifically to use the information it obtains under the summons to prosecute Kraken customers for tax evasion and other tax-related crimes.

IRS, Cryptocurrency & Kraken: What Customers Need to Know

Given this development, what do Kraken customers need to know? If Kraken complies with the summons, IRS criminal tax audits will almost certainly be forthcoming. As a result, Kraken customers would be well-served to reassess their federal tax compliance efforts, and those who have underpaid their federal income tax liability should work with an IRS criminal tax attorney to assess the options they have available.

Did You Invest with Kraken? Contact Boston IRS Criminal Tax Attorney Kevin E. Thorn

Are you a Kraken customer? If so, we strongly encourage you to contact us for more information. Boston IRS criminal tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, has extensive experience representing individuals and businesses in cryptocurrency-related criminal tax matters. To schedule a confidential initial consultation as soon as possible, call 617-692-2989 or tell us how we can reach you online now.

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