IRS authorized to access information on Circle’s crypto traders to nab tax cheats

A U.S. federal courtroom has granted authorization to the Internal Revenue Service, or IRS, to serve a John Doe summons to fintech agency Circle searching for all information on U.S. taxpayers who traded at the least $20,000 value of crypto property on its platforms between 2016 and 2020.

The summons will apply to Circle Internet Financial Inc. together with all “predecessors, subsidiaries, divisions, and affiliates, including Poloniex LLC.”

According to the Department of Justice’s announcement, Judge Richard Stearns concluded there may be “reasonable basis for believing that cryptocurrency users may have failed to comply with federal tax laws.”

The doc additionally notes the IRS “does not allege that Circle has engaged in any wrongdoing in connection with its digital currency exchange business,” including:

“The summons seeks information associated to the IRS’s ‘investigation of an ascertainable group or class of persons’ that the IRS has reasonable basis to believe ‘may have failed to comply with any provision of any internal revenue laws.’”

A Circle representative told Law360: “We’re reviewing [the summons], and of course expect to work collaboratively with the IRS in responding to the court order.”

Attorney General David Hubbert of the Department of Justice’s Tax Division stated: “Those who transact with cryptocurrency should meet their tax obligations like another taxpayer. The Department of Justice will proceed to work with the IRS to be certain that cryptocurrency homeowners are paying their justifiable share of taxes.”

Circle was based in October 2013 by Jeremy Allaire and Sean Neville, with the corporate launching a Bitcoin pockets the next 12 months that later grew to become its crypto funds utility, Circle Pay. In 2018, Circle launched USD Coin in partnership with Coinbase, which is now the second-largest stablecoin by market cap.

Circle purchased the popular digital asset exchange Poloniex in 2018, but announced Poloniex would “spin out” into a brand new firm backed by an investment group with ties to Tron’s Justin Sun the next 12 months.