US IRS Can Issue Summons to Bank Serving Crypto Broker SFOX Customers in Search of Tax Evaders

The John Doe summons will require M.Y. Safra Bank to provide information about SFOX customers who used the bank and may owe taxes on crypto transactions.

AccessTimeIconSep 23, 2022 at 2:57 a.m. UTC
Updated May 11, 2023 at 6:41 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

The Internal Revenue Service (IRS) can issue a "John Doe" summons to a bank that provided services for customers of cryptocurrency prime broker SFOX, a U.S. District Court judge in New York ordered Thursday. The ruling will allow the federal tax agency to continue looking for potential tax evaders in an ongoing probe.

The summons requires M.Y. Safra Bank to provide information about the SFOX customers who may not have reported and paid taxes on crypto transactions. In August, the IRS received authorization from a California judge to serve a "John Doe" summons on SFOX itself.

“The government’s ability to obtain third-party information on those failing to report their gains from digital assets remains a critical tool in catching tax cheats," IRS Commissioner Charles P. Rettig said in a U.S. Department of Justice (DOJ) press release. "The court’s granting of the John Doe summons reinforces our ongoing, significant efforts to ensure that everyone pays their fair share."

M.Y. Safra Bank is not alleged to have engaged in wrongdoing, the DOJ release said.

The IRS has previously served such summons's on companies like Kraken and Circle, and typically does so when it wants to confirm whether the recipient's customers are properly reporting their taxes. Cryptocurrency transactions are taxed like property, with the IRS collecting capital gains tax on every transaction.

The California judge's ruling authorized the IRS to serve a summons against SFOX, asking for information about any "U.S. taxpayers who conducted at least the equivalent of $20,000 in transactions in cryptocurrency between 2016 and 2021 with or through SFOX. SFOX will be required to share any records identifying those users and their transactions through the service.





Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

James Rubin

James Rubin was CoinDesk's U.S. news editor based on the West Coast.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.