IRS hunts crypto tax evaders with bankruptcy court order • The Register

The IRS has obtained a court order to collect records from a bank that the agency said will help it identify US taxpayers who failed to report taxable income from crypto trading.

Uncle Sam said yesterday that it is specifically going after documents from New York-based bank MY Safra, which partnered with SFOX – a prime cryptocurrency broker – to offer the latter’s customers access to bank accounts with cash. SFOX users could thus use funds at MY Safra to buy and sell digital coins.

The IRS received a similar request against SFOX in August. Both organizations were served with “John Doe” subpoenas, a tactic used by the IRS when it investigates wrongdoing without knowing the names of the accused taxpayers.

Basically, the IRS reckons that people have earned from trading cryptocurrencies via SFOX and MY Safra, and haven’t declared the income or paid the required tax on it, and so the agency wants to chase these people down and stick them in the wallet. ass-kicking machine.

“The John Doe subpoena directs MIN Safra to produce records that would enable the IRS to identify US taxpayers who were customers of SFOX and who engaged in cryptocurrency transactions that may not have been properly reported on their tax returns,” the agency said.

According to the IRS, its investigations into the world of cryptocurrency have revealed “significant deficiencies in tax compliance” across the industry and that it “has strong reason to believe that many virtual currency transactions are not being correctly reported on tax returns.” That said, there are many people who use crypto-coins for legitimate purposes, and pay due income tax on it.

According to the IRS statement, SFOX has more than 175,000 registered users who have conducted more than $12 billion in transactions since 2015. The agency said it has identified “at least ten” — count ’em, ten — U.S. taxpayers who used SFOX but failed to report transactions.

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With the data it collects from MY Safra, the tax authorities said they expect to be able to match the identities of SFOX users with Safra services “which the tax authorities will then be able to use together with other information to investigate whether these users complied with internal revenue laws.”

Damian Williams, US attorney for the Southern District of New York, where the subpoena was granted, said cryptocurrency transactions are not exempt from taxation. “The government is committed to using all the tools at its disposal … to identify taxpayers who have underestimated their tax obligations by not reporting cryptocurrency transactions, and to ensure that everyone pays their fair share,” Williams said.

And another thing

Meanwhile, America’s Commodity Futures Trading Commission has filed and settled charges against blockchain outfit Ooki (formerly known as bZeroX) and its founders.

The company and its pair of operators were charged collectively with illegal trading of assets over the counter, operating as unregistered futures commission dealers and failing to adopt a customer identification program, as required by the Bank Secrecy Act.

The CFTC announced its settlement in the case along with the filing, saying that the respondents (the company and its two founders) will have to pay a fine of $250,000, in addition to promising not to violate the Commodity Exchange Act and CFTC regulations. ®