A federal judge has ordered cryptocurrency exchange Kraken to release customer information to the IRS.
The Internal Revenue Service had asked for information to determine if Kraken’s customers had understated their revenues when filing taxes, according to a Friday (June 30) court ruling, which comes amid a broader government crackdown on the crypto sector.
PYMNTS has contacted Kraken for comment but has not yet received a reply.
U.S. Magistrate Judge Joseph Spero ruled that Kraken must provide the IRS with information on customers who had conducted more than $20,000 in transactions between 2016 and 2020. That information includes users’ names (and any pseudonyms), birthdates, taxpayer identification numbers, addresses, phone numbers, email addresses, and a number of other documents.
The judge denied the IRS’ request for information from Kraken’s know-your-customer (KYC) due diligence questionnaire, such as employment, net worth and source of wealth, as well as records of anti-money laundering investigations, saying they went “beyond what is reasonably necessary to achieve the purpose of these requests.”
The ruling comes months after Kraken ended its cryptocurrency staking service for American customers as part of a settlement with the Securities and Exchange Commission (SEC). The settlement, which included $30 million in penalties and other costs, came after the SEC charged Kraken with failing to register the offer and sale of this program.
“Whether it’s through Staking-as-a-Service, lending or other means, crypto intermediaries, when offering investment contracts in exchange for investors’ tokens, need to provide the proper disclosures and safeguards required by our securities laws,” SEC Chair Gary Gensler said at the time.
The court ruling comes as Gensler’s agency is intensifying its focus on the crypto sector, taking legal action last month against two of the industry’s biggest players.
The SEC last month filed 13 charges against Binance, the world’s largest crypto exchange, Binance, as well as against founder Changpeng Zhao, alleging a range of securities law violations and claiming the company “engaged in an extensive web of deception.”
Binance countered in a statement that “the Commission has determined to regulate with the blunt weapons of enforcement and litigation rather than the thoughtful, nuanced approach demanded by this dynamic and complex technology … the SEC’s actions undermine America’s role as a global hub for financial innovation and leadership.”
The following day, the regulator separately sued the U.S.-based and publicly listed crypto exchange Coinbase, a Binance peer, alleging that the platform had been allowing its own users to trade unregistered securities.
Coinbase has maintained that the SEC has failed to provide it with proper clarity on regulations, and last week filed a motion to dismiss the agency’s case.