Cryptocurrencies

IRS Sued by Ex-Coinbase User Over Seizure of Financial Records

Jim Harper wants to stop the IRS from engaging in what he calls unlawful records seizures. (Nikhilesh De/CoinDesk)

A former Coinbase user who last August received the now-infamous Internal Revenue Service (IRS) crypto letter is suing to block the tax agency from unlawfully seizing private financial records.

  • Bitcoin researcher Jim Harper accused the IRS, its commissioner and up to 10 unnamed agents of violating his privacy and due process rights under the Fourth and Fifth Amendments of the U.S. Constitution in a 26-page civil action filed in New Hampshire District Court on Wednesday.
  • Last summer, Harper and more than 10,000 other taxpayers learned in a “soft letter” that the IRS had “information” on their cryptocurrency accounts. IRS agents wrote they had reason to believe he had not paid taxes on the crypto. (Harper claims he’s paid his crypto taxes in full since 2013.)
  • The IRS never said where it got its “information,” but Harper believes his details may have been among the trove of 13,000 account records that IRS agents seized from Coinbase in early 2018 following a court order and controversial legal fight.
  • “If they acquired it via the Coinbase summons – and we don’t know that for sure – it was a defective process that denied me the opportunity to contest the seizure of my data,” Harper told CoinDesk in an email. “I’ll be seeking destruction of the records in the IRS’s control. A win would allow all recipients of the letter to seek the same.”
  • Caleb Kruckenberg, a New Civil Liberties Alliance lawyer who is representing Harper pro bono, told CoinDesk Harper’s case is an opportunity to put some checks on the power of the administrative state.

Read the full filing below:

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