- Kraken has called the IRS’s demand for user trading data an “unjustified treasure hunt”
- The agency asked for the trading data of all those with over $20,000 in transactions
- Kraken had argued that complying would be unduly burdensome
Kraken has called the demand from the Inland Revenue Service (IRS) for the trading data for all users who have transacted over $20,000 on the platform an “unjustified treasure hunt”. The U.S. tax agency had made a request to Kraken for user information but the exchange refused to comply, resulting in the IRS seeking assistance from a federal judge in February to enforce a summons issued to Kraken’s holding company, Payward Ventures. After several months of legal proceedings, the judge ultimately ruled in favor of the agency on Friday, stating that the summons should be enforced.
Kraken Argued That Compliance Would be Burdonesome
During the legal proceedings, Kraken had opposed the agency’s summons, characterizing the IRS’s investigation as an “unjustified treasure hunt.” The exchange’s legal team contended that complying with the IRS’s demand would impose an excessive burden, but the judge ruled that “a summons seeking relevant records will not be denied simply because it entails a substantial number of records or requires significant expenditure of time and resources by the recordkeeper.”
As a result of this ruling, Kraken is now obligated to hand over approximately 160 million transaction records and provide details regarding 59,351 accounts. However, the judge clarified that the IRS is not entitled to information related to Kraken’s due diligence questionnaires or anti-money laundering investigations.
In response to the judge’s ruling, a spokesperson for the exchange stated that it resisted the IRS’s request because it sought intrusive and unnecessary information about U.S. clients, including IP addresses, employment details, sources of wealth, net worth, and banking information.
The IRS has made several moves to track crypto usage more in recent years, including moving crypto holdings to the front page of its 1040 form and asking for more money to tackle tax evaders in 2021.
