Trading volume does not match reported tax, court rules Kraken must provide user data to the IRS.

The tax authorities emphasized that Kraken has over 4 million users, but less than 300,000 have submitted tax returns, a number that is disproportionately low considering the substantial amount of funds involved in the platform's trading activities.

IRS Requests User Data for Transactions Over $20,000

As early as 2021, Kraken received a subpoena from the IRS known as a "John Doe" request, demanding user data for transactions exceeding $20,000 between 2016 and 2020.

"John Doe" is a tool used by the IRS to investigate taxpayers with uncertain identities, and it requires authorization from the court.

Kraken Refuses to Cooperate with the IRS

Kraken has refused to comply with this request and negotiations with the IRS have been unsuccessful.

Kraken believes that the IRS's request goes far beyond the six-year scope and, apart from objecting, they refuse to provide user data such as names, birthdays, addresses, phone numbers, emails, and taxpayer IDs.

Kraken points out that data beyond identity information is essentially unnecessary and may not necessarily aid the IRS investigation, deeming the IRS's request as an unjustified treasure hunt, leading to both parties resorting to the court.

Kraken Loses Court Case

According to legal documents, the court has ruled that Kraken must provide user data for transactions exceeding $20,000 between 2016 and 2020. This includes:

• Names

• Addresses

• Geolocation

• Emails

• Transaction logs

• Taxpayer Identification Numbers (TIN)

However, the court has rejected some of the IRS's requests, such as:

• Related money laundering activities

• User net assets

• Source of user funds

Karen Cincotta, the IRS representative handling the case, stated:

Kraken has over 4 million users and has processed over $140 billion since its establishment in 2011, but only 288,330 users have submitted tax returns, which is disproportionate to the activities on the exchange platform.