The IRS obtained another John Doe summons in the investigation into users of the cryptocurrency prime broker sFOX.
U.S. District Judge Paul G. Gardephe entered an order in September which authorized the Internal Revenue Service (“IRS”) to issue a John Doe summons “requiring M.Y. Safra Bank to produce information about U.S. taxpayers who may have failed to report to the IRS, and pay taxes on, cryptocurrency transactions.”
From IRS-supplied court documents:
“SFOX is a cryptocurrency prime dealer and trading platform that connects digital currency exchanges, over-the-counter virtual currency brokers, and liquidity providers globally. SFOX has over 175,000 registered users who have collectively undertaken more than $12 billion in transactions since 2015. Based on its recent experiences with cryptocurrencies, the IRS has strong reason to believe that many virtual currency transactions are not being properly reported on tax returns. Among other reasons, there is no third-party reporting to the IRS in connection with such transactions, and summonses served on other cryptocurrency dealers have revealed significant underreporting of such transactions. Further, IRS investigations have identified at least ten U.S. taxpayers who used SFOX’s services for cryptocurrency transactions but failed to report those transactions to the IRS as required by law.”
“SFOX has partnered with M.Y. Safra to offer SFOX users access to cash-deposit bank accounts. SFOX users were able to use their funds at M.Y. Safra to buy and sell positions in virtual currency from SFOX. Based on M.Y. Safra’s arrangement with SFOX, the IRS expects that in response to the John Doe summons, M.Y. Safra will be able to provide information about the identities and cryptocurrency transactions of SFOX users who also used M.Y. Safra’s services—which the IRS will then be able to use in conjunction with other information to examine whether these users complied with the internal revenue laws.”
Earlier this year, in August, a federal court in the Central District of California entered an order which authorized the IRS to serve a John Doe summons on sFOX. The IRS is seeking information about U.S. taxpayers who transacted at least $20,000 in cryptocurrency through the platform.
U.S. Attorney Damian Williams said:
“Taxpayers are required to truthfully report their tax liabilities on their returns, and liabilities that arise from cryptocurrency transactions are not exempt. The government is committed to using all of the tools at its disposal, including John Doe summonses, to identify taxpayers who have understated their tax liabilities by not reporting cryptocurrency transactions, and to make sure that everyone pays their fair share.”
Deputy Assistant Attorney General David A. Hubbert said:
“Taxpayers who transact with cryptocurrency should understand that income and gains from cryptocurrency transactions are taxable. The information sought by the summons approved today will help to ensure that cryptocurrency owners are following the tax laws.”
IRS Commissioner Charles P. Rettig said:
“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. The court’s granting of the John Doe 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.”
Order authorizing summons (pdf)
(via darknetlive.com at https://darknetlive.com/post/irs-obtains-order-authorizing-another-john-doe-summons-in-sfox-probe/)