IRS Obtains Court Order Authorizing Summons For Records Relating To U.S. Taxpayers

September 26, 2022

On 9–22–22, U.S. District Judge entered an order on “authorizing the IRS to issue a so-called 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.” “Specifically, the IRS summons seeks information about customers of SFOX, a cryptocurrency prime broker, who used banking services that M.Y. Safra Bank offered to SFOX customers engaged in cryptocurrency transactions.” ”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.”

“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” “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.” Court “granted the IRS permission to serve what is known as a John Doe summons on M.Y. Safra. There is no allegation in this action that M.Y. Safra engaged in any wrongdoing.”

“Rather, the IRS utilizes John Doe summonses to obtain information about possible violations of the internal revenue laws by individuals whose identities are unknown.” The John Doe summons directs M.Y. Safra to produce records that will enable the IRS to identify U.S. taxpayers who were customers of SFOX and who engaged in cryptocurrency transactions that may not have been properly reported on tax returns.”

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