Monday’s order by the Central District of California Federal Court authorized the United States Internal Revenue Service to serve a John Doe summons upon SFOX, a Los Angeles-based crypto prime dealer. To receive the order, the IRS filed suit. It directs SFOX that they reveal the identities and documents of U.S. taxpayers as well as information relating to cryptocurrency transactions equal to at least $20,000 between 2016 and 2021.
The IRS filed suit in Southern District of New York for a John Doe summons to SFOX. M.Y. is SFOX’s partner bank. Safra is based in New York. Federal Deposit Insurance Corporation (FDIC), insured accounts are provided by the bank to SFOX institutional traders.
Related: Wyoming regulators approve trust charter for crypto dealer SFOX
According to a Justice Department announcement that mentioned the “inherently pseudoanonymous aspect” of cryptocurrency transactions as one motivation for summons, the IRS didn’t allege any wrongdoing by SFOX. The IRS has used John Doe summonses before to get information from Circle and Coinbase, and Kraken between 2018-2021.
Taxbit’s Miles Fuller reminds us that the U.S. Congress passed reporting requirements for digital assets. They will be in effect January 2024 for 2023 tax. These requirements could have an impact on the IRS’ future use of John Doe summonses.
1/ News is out that the IRS has filed court papers seeking to serve two additional John Doe summons on crypto platform sFOX, and its affiliated bank M.Y. Safra. Here’s a quick overview of the current situation.
Miles Fuller (@TaxBitMiles), August 11, 2022
Bloomberg quoted a May Barclays analysis that showed cryptocurrency transactions are subject to less than half of the taxes owed. Bloomberg also reports that SFOX boasts more than 175,000 users who have transacted $12 billion since 2015. SFOX was established in 2014 by Nathan Blecharczy, co-founder of Airbnb, Blockchain Capital, Y Combinator, and Digital Currency Group.