DOJ lawyers argue Coinbase customers can’t challenge the IRS’s summons

Journalist:
December 30, 2016

On November 17, the IRS filled a “John Doe” summons targeting transaction records of prominent bitcoin company Coinbase’s bitcoiners registered between January 2013 and December 2015. At the time, the exchange argued it takes user privacy very seriously, and as such it would work towards protecting it.

On December 1, a federal judge approved the IRS summons, and demanded Coinbase to reveal user transaction records. Soon, a Coinbase customer named Jeffrey K. Berns, who is also a lawyer, filed a motion to block the IRS’ efforts to access Coinbase users’ records.

Since the IRS filed a John Doe summons, this would allow it to obtain information about all taxpayers in a given group of people, even without knowing their identities. At the very least, hundreds of thousands of Coinbase customers are involved in this case.

Given the facts, Mr. Berns argues that the IRS has an ulterior motive in the summons, advancing the possibility of it being a crusade against virtual currencies under the guise of tax enforcement. Moreover, according to him the IRS cannot be trusted with such information.

Now, government lawyers argue Coinbase’s customers have no legal basis to try and stop the IRS from acquiring user records. This would simply mean Mr.Berns has no right to intervene in the summons. Department of Justice (DOJ) lawyers even went as far as withdrawing the summons pertaining to Mr. Berns:

Since Mr. Berns has come forward and identified himself as one such taxpayer, the government has given notice to Coinbase that is has withdrawn its summons insofar as it relates to him. Mr. Berns’ motion is therefore moot.

DOJ lawyers also attempted to dispute the notion that the IRS wasn’t trustworthy when it comes to this type of data. Mr. Berns also contended this notion, as according to it, agencies in the Executive Branch had their computers systems hacked in the past, which means they aren’t qualified to handle sensitive personal and financial information.

Furthermore, DOJ lawyers also had something to say when it comes to Mr.Berns’ ulterior motive argument:

It is completely far-fetched to conclude that the government is pursuing the John Doe summons to harass taxpayers who use virtual currency or to further some sort of a political agenda against virtual currency use….Mr. Berns has offered this Court nothing more than conjecture in support of his conclusion that the John Doe summons was sought in bad faith and that its issuance and service was an abuse of this Court’s process.

Coinbase Customer Fights Back

Withdrawing the subpoena regarding Jeffrey K.Berns wasn’t enough to make him leave the case, as his law firm, Berns Weiss LLP, later on argued the IRS’s willingness to do so corroborated his argument that it does not have a legitimate purpose to seek substantial personal and financial information.

Mr.Berns is in this case not just fighting for the privacy of the 3 million Americans affected by the IRS’s summons, but also for bitcoiners all over the world who may in the future face similar cases.

Image from Shutterstock.

Francisco Memoria @FranciscoMemor

Francisco is a cryptocurrency writer who's in love with technology and focuses on helping people see the value digital currencies have. Twitter: https://twitter.com/FranciscoMemor