Judge forces Coinbase to hand over years’ worth of user data to IRS

Bitcoin startup denounces IRS’ move, calling it a “sweeping request.”

On Wednesday, a federal judge in San Francisco approved a request made earlier this month by the Internal Revenue Service to force Coinbase, a popular online Bitcoin wallet service, to hand over years of data that would reveal the identities of all of its active United States-based users.

The IRS is concerned that some of Coinbase’s customers may have used its service to circumvent or mitigate tax liability. Federal investigators say they need Coinbase’s records to be able to identify some Bitcoin wallets and to check against tax records to make sure Coinbase’s users are paying any and all proper taxes on their Bitcoin-related income.

In a two-page court order, US Magistrate Judge Jacqueline Scott Corley agreed that the IRS can serve the San Francisco-based company with a form that would require disclosure of essentially all personal data of all Coinbase users who conducted a transaction between 2013 and 2015. (Full disclosure: such records would include this reporter, who briefly possessed a small amount of bitcoins in 2014 and sold them as part of our Arscoin story.)

The IRS will now require Coinbase to provide, among other information:

Account/wallet/vault registration records for each account/wallet/vault owned or controlled by the user during the period stated above including, but not limited to, complete user profile, history of changes to user profile from account inception, complete user preferences, complete user security settings and history (including confirmed devices and account activity), complete user payment methods, and any other information related to the funding sources for the account/wallet/vault, regardless of date.

Any other records of Know-Your-Customer due diligence performed with respect to the user not included in paragraph 1, above.

David Farmer, a Coinbase spokesman, told Ars that the company plans to fight the order in court. The government’s request so far has been ex parte, or one-sided—Coinbase has not been formally invited to court to challenge the IRS. “We are aware of, and expected, the Court’s ex parte order today,” the company said in a statement provided by Farmer on Wednesday afternoon. “We look forward to opposing the DOJ’s request in court after Coinbase is served with a subpoena. As we previously stated, we remain concerned with our US customers’ legitimate privacy rights in the face of the government’s sweeping request.”

Via: Ars Technica