The Central District of California federal court issued a ruling on Monday allowing SFOX, a primary cryptocurrency trader with offices in Los Angeles, to be served with a John Doe summons by the US Internal Revenue Service (IRS).
To acquire a John Doe summons on SFOX, the IRS also filed a lawsuit in the Southern District of New York. M.Y. Safra, a bank that works with SFOX, has its main office in New York. For institutional traders on SFOX, the bank offers accounts that are insured by the Federal Deposit Insurance Corporation (FDIC).
SFOX ordered to reveal customer identities through John Doe summons
The IRS filed a lawsuit to get the order, which requires SFOX to provide the identities of customers who are U.S. taxpayers as well as documentation linked to cryptocurrency transactions totaling at least $20,000 between 2016 and 2021.
According to a Justice Department release, the IRS did not claim any illegality on the part of SFOX, citing the “inherently pseudo-anonymous aspect” of cryptocurrency transactions as one of the justifications for the summons.
The IRS has previously utilized John Doe summonses to acquire information from Circle, Kraken, and Coinbase between 2018 and 2021.
Crypto tax transparency
According to Miles Fuller of Taxbit, the U.S. Congress established reporting regulations for digital assets that would take effect in January 2024 for 2023 taxes. These conditions might affect how the IRS uses summonses for John Doe in the future.
1/ News has trickled in that the IRS has filed court petitions seeking to serve two more John Doe summons on crypto platform sFOX and its affiliated bank M.Y. Safra. Here is a quick summary of what is going on.
— Miles Fuller (@TaxBitMiles) August 11, 2022
Bloomberg highlighted a Barclays study from May that revealed investors only pay around half the taxes due on cryptocurrency transactions. Bloomberg also reports that since 2015, more than 175,000 customers of SFOX have transacted $12 billion.
SFOX was established in 2014 with funding from Blockchain Capital, Airbnb co-founder Nathan Blecharczy, Y Combinator, and the Digital Currency Group.