IRS Continues Use of "John Doe" Subpoenas

The IRS issued a subpoena to M.Y. Safra Bank, requesting the transaction data for SFOX, a cryptocurrency prime broker for institutional investors. This request is a bit different, as the IRS did not subpoena the broker directly. It targeted a “smaller” bank, which is something the IRS hasn’t shown willingness to do in the past.

The IRS believes the subpoena will uncover cryptocurrency transaction details related to a Ponzi scheme. These transactions were also not properly reported on the related tax returns. It should be made clear that the IRS already had suspicions of unreported activity during an audit of the individual in question. This was not a random subpoena of a bank in hopes to collect transaction reports of users. 

How does this relate to earlier subpoenas and does it affect anything moving forward?

The willingness of the IRS to subpoena a small institution should show taxpayers that cryptocurrency-related issues continue to be a high priority. This doesn’t mean the IRS will subpoena cryptocurrency platforms without reason, but in specified cases, it will use everything in its power to uncover unreported transactions. 

It will be interesting to see how the courts rule in the John Harper case, but for now, the IRS will continue to, legally, use these subpoenas to access cryptocurrency transaction data.