Largest US Bitcoin Exchange Is "Extremely Concerned" With IRS Crackdown Targeting Its Users

Tyler Durden's picture

Last Thursday we reported that in a startling development seeking to breach the privacy veil of users of America's largest bitcoin exchange, the IRS filed court papers seeking a judicial order to serve a so-called “John Doe” summons on the San Francisco-based Bitcoin platform Coinbase.

The government’s request is part of a bitcoin tax-evasion probe, and seeks to identify all Coinbase users in the U.S. who “conducted transactions in a convertible virtual currency” from 2013 to 2015.

What makes a “John Doe” unique, is that it represents a special "shotgun" form of summons to look for tax evaders that allows the IRS to obtain information about all taxpayers in a group or class of people, even if the agency doesn’t know their identities. The IRS has deployed the tactic in its recent crackdown on undeclared offshore accounts.

In other words, the US government's crackdown on local bitcoin users has begun.

In the court filing, the WSJ reports that  Justice Department attorneys wrote that an IRS agent had “identified and interviewed three taxpayers who had used virtual currencies as a means of evading taxes” and that two of these taxpayers were corporate entities that “had wallet accounts at Coinbase and attempted to conceal bitcoin transactions as technology expenses on their tax returns.”

According to Forbes' tax blogger Kelly Phillips Erb, in his declaration to the court in support of the summons, IRS Senior Revenue Agent David Utzke noted that his investigations included two taxpayers with annual revenues in the millions who “admitted disguising the amount they spent purchasing the bitcoins as deductions for technology expenses on their tax returns.” Those corporate taxpayers had wallet accounts at Coinbase. Unlike other kinds of financial transactions, there is currently no third-party information which requires separate reporting for bitcoin (think of third-party reporting like the forms 1099 issued by your bank). This, says IRS, means that the “likelihood of underreporting is significant.”

The likelihood of underreporting combined with the anonymity of virtual currency means that the IRS needs more data to complete its investigation. It also explains why the “John Doe” summons is so broad.

Meanwhile, Coinbase - not to mention its VC bakers - was "extremely troubled" by the development. It posted the following statement on its website:

Our customers may be aware that the U.S. government filed a civil petition yesterday in federal court seeking disclosure of all Coinbase U.S. customers’ records over a three year period. The government has not alleged any wrongdoing on the part of Coinbase and its petition is predicated on sweeping statements that taxpayers may use virtual currency to evade taxes.

 

Although Coinbase’s general practice is to cooperate with properly targeted law enforcement inquiries, we are extremely concerned with the indiscriminate breadth of the government’s request. Our customers’ privacy rights are important to us and our legal team is in the process of examining the government’s petition. In its current form, we will oppose the government’s petition in court.

Additionally, Reuters reports that Coinbase cited concerns with the wide-ranging nature of the government's request. "We want to work with law enforcement — that's generally our policy," the company's head legal counsel, Juan Suarez, said Friday. "But we can't tolerate sweeping fishing expeditions. We are very concerned about the financial privacy rights of our customers."

Chris Padovano, a lawyer and the founder of Decentralized Legal, said he expects Coinbase to turn back the government's request. Cited by Reuters, Padovano said that "there are two questions here. One is whether or not (the IRS has) reasonably identified a class of individuals and has a reasonable basis for believing that all U.S. customers for Coinbase from 2013-2015 may have failed to comply with laws based on these three users," he said. "Two is whether the information sought by IRS is not available from any other reasonable source than Coinbase."

* * *

Good luck to Coinbase fighting the IRS: if America's tax collector is intent on getting the identities of the biggest traders are in America's largest bitcoin exchange, it will certainly succeed (especially if they happen to be conservatives).

It is still possible that a judge will overturn the request. Before it can serve such a summons, the IRS must first get court approval, which is why we expect the entire bitcoin community to follow the Northern District of California court fight closely as it will have profound implications not only for the tax-treatment of all future bitcoin transactions, whose biggest draw until this point at least, had been their relative anonymity.

It will also have vast chilling effects on the population of US bitcoin traders, and may ultimately lead to "business continuity" problems for Coinbase should its clients seek to withdraw their funds in bulk into an otherwise illiquid market, ahead of what may end up being the latest IRS witch hunt.

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King Tut's picture
King Tut (not verified) Nov 21, 2016 9:07 PM

I am hoarding Bitcoins under my virtual mattress

Tarzan's picture

Another day goes by on Zero Hedge with no PizzaGate?

bamawatson's picture

fresh
very fresh
raw
fresh & raw

remain calm's picture

Hey IRS, fuck off, go mine your own business

Draybin Deffercon III's picture
Draybin Deffercon III (not verified) remain calm Nov 21, 2016 9:49 PM

I AM 0FF TEH Wagon!!!

OMG! SATOSHI WE LOVES Y0U!!!

847328_3527's picture

Just inform the irs that you know the Clintons and they'll back off fast.

RaceToTheBottom's picture

Come oout with the big guns right off the bat:

"I donated all bitcoins to the Clinton Foundation and that they wrote you an email about it.  Didn't you get the email?  It was sent on her secure server...."

DontGive's picture

Just BleachBit the account ownership data.

"We don't know dick" (ala Hillary defence).

 

HedgeJunkie's picture

Shouldn't FoneStar be weighing in on this?

As I've said many times going back many years.

I don't understand BitCoin.  But if you can't hold it in your hand, squirrel it away, and be able to use it in any environment, then it's not real money.

And there is NEVER anonimity when it comes to the IRS (or, from personal experience, the fucking FBI).

SILVERGEDDON's picture

Dragbin Defcon III is Fonestar reincarnated. 

beemasters's picture

The IRS's of the world should employ creative teams, find ways to set up their own money-making, productive enterprises instead of squeezing and ripping off individuals. There is just no shame being mafia branches of governments, apparently.

MANvsMACHINE's picture

How can the IRS be interested in the transactions of something that doesn't exist? If I want to give someone my money in exchange for a bag of nothing, what business is it of the IRS?

Draybin Deffercon III's picture
Draybin Deffercon III (not verified) MANvsMACHINE Nov 21, 2016 11:52 PM

Bitcoin does not exist?

Did your comment just not exist too?

Silver Swan's picture

Money? I doubt any money was ever exchanged for a bitcoin. It's just one virtual currency in exchange for another.

PS. Both of them have the same intrinsic value.

tmosley's picture

Have purchased silver with bitcoin on multiple occassions. The transactions are instant, and the silver ships the next day rather than having to wait two fucking weeks while they confirm the check isn't going to bounce.

But hey, fuck that noise. Bitcoin is the devil, invented by the CIA for some reason. Let's know nothing of it!

webmatex's picture

Good point about the silver coins.

I bought load of BC before Bank bailin in Cyprus (was obvious), bought for 46 sold for 200+ bought a new tractor.

Have 2.5 i bought at 500 when china capital controls (February)? happened and that stands around 700 now.

My few bitcoin bets over 4 years have been more fun than my 12+ year silver investment.

You can't guess the PM's market as its fixed but sometimes with bitcoin you can.

Overall its all been a happy experience for me.

valjoux7750's picture

I'm a small fish on coinbase for about 3yrs now, I only own 4.12 BTC , bought in at 622.00 sitting at 747.00 ATM.   This story is old and the IRS is just legitimizing coinbase by its investigation. So whatever......

valjoux7750's picture

Younay sayers really should  diversify and the next time you buy some pm buy some btc instead. Then. Next year at this time you can shoot yourselves because you should have bought more. An the its not real argument holds no water, I have a debitcard tied to my btc at coinbase that I use every day. Real enough for me

MANvsMACHINE's picture

How can the IRS be interested in the transactions of something that doesn't exist? If I want to give someone my money in exchange for a bag of nothing, what business is it of the IRS?

August's picture

The moral of the story:

If you believe that depriving the IRS of their "fair share" of your assets is indeed the way to go, for God's sake don't try to hide your transations and secret assets in a US-baed entity. Jeez...

Save_America1st's picture

@Tarzan,

Yeah, watched that vid earlier that you posted.  Fucking sick crazy shit.  I think this keeps going and they out the scumbags.

And SGTReport.com is all over PizzaGate too:

http://sgtreport.com/

 

Draybin Deffercon III's picture
Draybin Deffercon III (not verified) Save_America1st Nov 21, 2016 9:53 PM

There is nothing that teh IRS can do about Bitcoin! Bitcoin is invincible and if you take reasonable preCautions... untraceable!!

Trolly McTrollface's picture

Untraceable and worth virtually nothing ! Collect as much nothing as you want :)

Draybin Deffercon III's picture
Draybin Deffercon III (not verified) Trolly McTrollface Nov 21, 2016 10:30 PM

$750 per coin fuckhead. The most valuable currency on Earth.

Multi's picture

Please, don't mislead people, It's not untraceable.

There are digital currencies that try to implement untraceable features, i.e. CloakCoin, Dash. Not the case of BitCoin.

Nobodys Home's picture

A large pedophile ring supposedly including the Clintons, Podesta and many other high profile people.

Oh.....Boris is pull wool over eyes. Very funny.

Malvern Joe's picture

Yes.  The NYPD was going to give a press conference about Pizzagate, but the DOJ made seious threats and apparently shut it down.  We'll have to wait for AG Sessions, if he has the balls.

AtATrESICI's picture

This is pre-pizza gate elite pedo info.

Check out this FBI affidavit in support of application for search warrant for pedophile porn sites on the tor network from 2013. i read through the narrative to website 19. the document seemed to confirm that At least one of the logos the CLogo in the document at the following URL https://file.wikileaks.org/file/FBI-pedophile-symbols.pdf is related to pedophile networking, if the affidavit is in fact authentic. Maybe.

Affidavit in support of application for search warrant.
https://assets.documentcloud.org/documents/3217560/Dokument-om-p%C3%A6do...

Below you will find links to more elite and not so elite pedophile news stories. There maybe a bit of redundancy in the links below.

The ruling class seems to be totally fucked up on many levels.

60 Minutes Australia UK pedophiles FULL PROGRAM HD
https://www.youtube.com/watch?v=JfNeB6Hx7N0&feature=youtu.be

60 Minutes Australia UK pedophiles FULL PROGRAM HD
https://www.youtube.com/watch?v=JfNeB6Hx7N0&feature=youtu.be

60 Minutes Exposing The Truth About Boystown (Breaking The Silence)
https://www.youtube.com/watch?v=7y2PddkkJgs

Worldwide paedophile ring busted in sting operation
https://www.youtube.com/watch?v=83NtUIlv-Oo

NWO Pedophile ring at the highest level! Scumbag Bureaucrats!
ttps://www.youtube.com/watch?v=Q6p7XPbyHdw

The Franklin Cover-Up & Johnny Gosch Story
https://www.youtube.com/watch?v=mXiKIlh3dqg

CONSPIRACY OF SILENCE [Banned Discovery Channel Documentary]
https://www.youtube.com/watch?v=AY-F5JoHoho

Government Child Abuse (BANNED Discovery Channel Documentary) | The Franklin Cover-up
https://www.youtube.com/watch?v=4AFrMpQxbmk

Disney world Child molesters caught on cam
https://www.youtube.com/watch?v=pWm_TIVsA00

The Hunt For Britains Paedophiles part 1 of 3
https://www.youtube.com/watch?v=ubB58gb-syo

The Hunt For Britains Paedophiles part 2
https://www.youtube.com/watch?v=7sTLJSn6vkY&t=777s

The Hunt For Britains Paedophiles part 3
https://youtu.be/xth53sJSV60

Very Sick Men
https://www.youtube.com/watch?v=n4Al2EBpL44

Trafficking of Children in the United States: Documentary Film
https://www.youtube.com/watch?v=oXlvObVuKeE

Children for Sale: The Fight to End Human Trafficking (2015)
https://www.youtube.com/watch?v=oXjxeQuhdAs

HRH of Aquitaine's picture
HRH of Aquitaine (not verified) AtATrESICI Nov 21, 2016 11:17 PM

Wow. You have more information than I ever wanted to know about pedos and liberals. It doens't surprise me that perverts join up with narcissists to break the rules for their own advantage.

Power corrupts and absolute power corrupts absolutely.

Seriously sick and twisted shit.

HRH of Aquitaine's picture
HRH of Aquitaine (not verified) AtATrESICI Nov 21, 2016 11:18 PM

Dup

HRH of Aquitaine's picture
HRH of Aquitaine (not verified) AtATrESICI Nov 21, 2016 11:19 PM

Dup.

zorba THE GREEK's picture

IRS goes after bitcoin, and the Clinton Foundation, "The mammoth in the room" goes unscathed by any and all government agencies. Time to clean house Don.

Hulk's picture

the IRS needs to go the way of TTP. A greatly reduced tax is needed along with a non empire building, much smaller government...

Ignatius's picture

No doubt the Podesta dude has a sick taste in art (my opnion - shared), but I have caught wind that this "pizzagate" story may well be a honeytrap to discredit alternative media.  As example, Reddit don't cover shit that's controversial, but they are allowing some coverage of this.

Check sources and beware.

bamawatson's picture

i agree, have been slowly carefully researching
dig the part about the missing child n frued n podesta n his brother n drawings of perps

edit:
http://victuruslibertas.com/2016/11/do-john-and-tony-podesta-have-a-conn...

King Tut's picture
King Tut (not verified) Ignatius Nov 21, 2016 10:09 PM

I think it is conspiracy by Papa John and Little Caesar to get people to think about pizza and then they order one.

AtATrESICI's picture

That sounds extremely plausible. The code words could be for the pay for play dealings, money laundering, drugs, or whatever. 


In the Affidavit in support of application for search warrant that can be found in a link on one of my other posts on this page NONE of the "Podesta pedophile code words" were used. 

s2man's picture

Every thread?   Shut up.

Tarzan's picture

Fuck off pervert, I'll post it every hour if I choose!

It's a fucking travesty that these fucks get away with this shit, your all fucking cowards!

TeaClipper's picture

Tiresome twat, give it a fucking rest. And calling the guy a pervert makes you no better than every snowflake fucking moron who tries to shut any debate down by calling people people racist, pedo etc etc etc..

Just fuck off and die

Tarzan's picture

Whose trying to shut down the debate?  You and your buddy, who obviously have no clue!  How the fuck do kings and queens get away with fucking 5 year olds and slitting their throats?  Because snowflake morons like you say look the fuck away!

This shit will come to a head by God!  The blood of babies are crying out, while you say shut up, FUCK THAT!

That's why it's gone on so fucking long.  That's why Jimmy Savile was able to fuck kids and bath in their blood for decades, while hob nobbing with royalty.  The queen knighted that psychopath, while everyone around him knew he was FUCKING CHILDREN!  It wasn't until he died that anyone talked above a whisper about it, because we're all fucking cowards!

Now we know that these psychopaths in power on our side of the pond are carrying kids into dungeons for sexual pleasure, and you say "give it a rest"?  Your either ignorant, a troll, or a pedophile!

Shout this shit from every street corner, until these satanic psychopaths are exposed for the child fuckers they are!

TeamDepends's picture

Where is fonestar? We want our money back!

Tijuana Donkey Show's picture

He dead. He done fled, and left us nothing. I'm starting to thing Fonestar is Obama's screen name.

Draybin Deffercon III's picture
Draybin Deffercon III (not verified) Tijuana Donkey Show Nov 21, 2016 9:52 PM

fonestar lives!

nmewn's picture

Tried to tell anyone who would listen, if you traverse THEIR NETWORKS they have you by the balls anytime they want. Cash in hand, exchanged for coin or bullion, not so much. Plus everyone already knows my nautical skills suck REALLY BAD and my memory is nowhere near as good as it used to be...

...so, plausible deniability ;-)

Draybin Deffercon III's picture
Draybin Deffercon III (not verified) nmewn Nov 21, 2016 10:44 PM

hey nmewn thought you don't comment on Bitcoin threads cos "crazy fonestar" be lurK1ng? And things do traverse their network in perfect secrecy.

https://localbitcoins.com