US Sues US Internal Revenue Service for Collecting Cryptocurrency Data


The US Internal Revenue Service (IRS), the US Internal Revenue Service, is being sued by New Hampshire resident James Harper for collecting his private financial data from at least one cryptocurrency trading platform. Mr. Harper is one of more than 10,000 cryptocurrency holders who have received a letter from the IRS accusing them of inappropriate reporting of their transactions. According to a complaint filed earlier this month with the US Court of Appeals for the First Circuit, the IRS took Mr. Harper's data "without reasonable suspicion and without a warrant", thus violating his constitutional rights protected by the Fourth and Fifth Amendments. The appeal follows a March 2021 decision by the US District Court for the District of New Hampshire dismissing a legal action against the IRS, where Mr. Harper sought damages and an injunction requiring the tax agency to erase private financial data that got.

Data and Privacy

Pointing to the contracts he signed with cryptocurrency brokers, Mr. Harper claims that each of these companies has agreed to provide "robust privacy protections" for your financial records and "give you a reasonable expectation of privacy in your personal information" . He further argues that the contracts recognize that his data is his property, making it clear that he has not voluntarily abdicated his Fourth Amendment rights when doing business with companies. According to court documents, Mr. Harper had accounts at Coinbase, Abra and Uphold. Since Uphold confirmed that it did not provide the litigator's private financial information to the IRS, he claims that authorities likely got it from Abra or Coinbase, or both. Mr. Harper opened an account with Coinbase in 2013, with the California-based exchange providing terms of agreement stating that he “would take reasonable precautions ​​… to protect (account owner's) personal information from loss, misuse, access unauthorized disclosure, alteration, and destruction. “In 2013 and 2014, Mr. Harper deposited Bitcoin that he received as revenue from his consulting work into his Coinbase account. The litigant claims that it declared both transactions on its 2013 and 2014 tax returns and all “appropriate income from Bitcoin payments,” including capital gains tax. Mr. Harper, who liquidated his stakes in Coinbase's account in 2015 and in 2016 no longer held any cryptocurrency with the exchange, also states that he paid "appropriate capital gains on any Bitcoin revenue for fiscal years 2015 and 2016" . Between 2016 and August 2020, Mr. Harper closed his accounts with Abra and Uphold. Prior to the District Court's March 2021 decision, in August 2019, Mr. Harper received a letter from the IRS, with the agency alleging that he did not "adequately report" his "virtual currency transactions". In the following press release, the IRS urged taxpayers to “take these letters very seriously” and “correct past mistakes”. These allegations led Mr. Harper to the conclusion that the IRS violated its contracts with at least one of the exchanges. However, the district court ruled that the US government's sovereign immunity prohibits such action. “Earlier this year, the Supreme Court ruled that the IRS cannot block lawsuits that challenge the constitutionality of its behavior by hiding behind the Anti-Injunction Act,” said Caleb Kruckenberg, a lawyer for the New Civil Liberties Alliance who represents Harper. "Unfortunately, this decision was made after the district court allowed the IRS to abuse the law in just that way." However, the attorney is confident that since the case, under the terms of the Supreme Court, is a "cinch," the First Circuit "should quickly reinstate this process." Furthermore, as stated in the original action in July 2020, the “case presents the opportunity to correct the course of constitutional law” and prevent the IRS from requiring access to personal financial records “even when a person has entered into a contract with a third party party that promises to protect your private information from such intrusion. ” *Translated and edited by permission of Decrypt.co

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