Crypto exchange Kraken has inched further into its legal battle against the United States Internal Revenue Service (IRS) by calling the agency’s request for information about users’ funds an “unjustified treasure hunt.”
How Did It Start?
The ongoing legal tussle between the agency and the crypto exchange started in February. The IRS is charged with the responsibility of ensuring that citizens understand and meet up to their tax obligations.
The agency began an investigation of citizens who might be underreporting their taxes. It then had reason to believe some Kraken crypto users may be guilty of underreporting tax liabilities.
This prompted the financial authority to request for the exchange to open its records. That way, the IRS would know Kraken users that performed a minimum of $20,000 in crypto trading within a single year between 2016 and 2020, and ascertain those guilty of its investigated matter.
Efforts to make Kraken willingly comply proved futile. This pushed the financial agency to lay a petition in court to enforce its summons filed in February. However, the exchange is reluctant to comply.
Kraken Compares Matter to 2017’s Coinbase vs. IRS
To buttress its point, Kraken referred to a year-long legal battle between Coinbase and the IRS over a similar tax issue that concluded in 2017.
At the time, U.S. District Judge Jacqueline Scott Corley ruled that Coinbase was under the compulsion to report to the IRS after a “John Doe” summons was tabled before the court. However, the agency cut down on its initial demand due to Coinbase’s continued refusal.
In a court filing submitted to a San Francisco court, Kraken stated:
“Rather than abide by Coinbase’s ground rules, the IRS doubles down, making even more expansive requests and relying on a thinner rationale.”
This is not the first time Kraken will find itself in the claws of a U.S. financial agency. In February, the U.S. Securities and Exchange Commission (SEC) probed the crypto exchange over matters in which Kraken offered sales of unregistered securities.
