The U.S. government has asked the Supreme Court to reject a Coinbase user’s challenge against the IRS’s attempt to obtain his cryptocurrency transaction records.
Key Points:
- The Dispute: The U.S. government argues that Coinbase user James Harper does not have the constitutional right to block the IRS from accessing his cryptocurrency transaction records.
- Harper’s Legal Challenge: Harper, who has traded Bitcoin on Coinbase for years, filed a lawsuit claiming that the IRS’s actions amounted to an unconstitutional search of his personal records.
- The IRS Investigation: The case revolves around a 2016 IRS investigation into widespread underreporting of cryptocurrency gains. The IRS found a large discrepancy between the millions of Coinbase users trading Bitcoin and the relatively few who reported gains on their tax filings.
- Court Ruling: Lower courts disagreed with Harper, ruling that Coinbase’s records are business documents, not Harper’s personal records, and that the IRS acted within its legal rights.
Government’s Position
In its petition, the U.S. government emphasized that the Supreme Court’s jurisprudence supports the IRS’s position. Citing past cases, such as United States v. Miller, the government argued that individuals do not have a reasonable expectation of privacy in financial records held by third parties—like Coinbase.
The government also pointed out that Coinbase’s privacy policy warned users that information could be shared with federal authorities, further justifying the IRS’s actions.
The Supreme Court has not yet decided whether it will hear the case. A denial would uphold the decision of the First Circuit Court in favor of the IRS.
Coinbase Data Breach
On May 15, Coinbase reported a data breach in which attackers bribed customer support staff in India to access confidential user information. Stolen data included customer names, account balances, and transaction histories. Coinbase confirmed that the breach affected around 1% of its users who make monthly transactions. Among those impacted was venture capitalist Roelof Botha, managing partner at Sequoia Capital.
The breach led to a wave of lawsuits against Coinbase. At least six legal complaints were filed on May 15 and 16, accusing the exchange of failing to implement adequate security measures and mishandling its response to the breach.
