U.S. Government Asks Court to Dismiss Coinbase User’s Challenge Over Crypto Records Disclosure

 

U.S. Government Urges Supreme Court to Reject Challenge Over IRS Access to Coinbase Records

The U.S. government has asked the Supreme Court not to hear a challenge brought by Coinbase user James Harper, who is contesting the IRS’s access to his cryptocurrency transaction records.

In a brief filed on May 30, Solicitor General D. John Sauer argued that Harper has no Fourth Amendment right to prevent the IRS from obtaining his financial records from Coinbase. The government maintained that Harper voluntarily shared his data with the exchange and that the IRS acted within legal bounds by using a judicially approved summons.

Harper’s case stems from a 2016 IRS investigation into widespread underreporting of cryptocurrency-related income. At the time, the IRS identified a significant disparity between the number of active Bitcoin traders on Coinbase and the relatively low number of individuals reporting crypto gains on their taxes.

To address this, the IRS issued a “John Doe” summons to Coinbase, compelling the exchange to hand over records of high-volume users. Harper, who traded Bitcoin on Coinbase during the period in question, later filed a lawsuit, claiming the IRS’s actions amounted to an unconstitutional search of his personal records.

However, lower courts ruled against Harper, concluding that the requested Coinbase records were business documents, not private papers, and that the IRS’s actions were lawful.

In its Supreme Court filing, the government cited established precedent, including United States v. Miller, to argue that individuals have no reasonable expectation of privacy in financial records held by third parties. It also highlighted Coinbase’s privacy policy, which explicitly states that user information may be shared with law enforcement.

“To the extent petitioner made those arguments below, the court of appeals correctly rejected them as both foreclosed by this Court’s precedent and meritless,” the government wrote.

The Supreme Court has yet to decide whether it will take up the case. If it declines, the First Circuit’s ruling in favor of the IRS will stand.

Coinbase Discloses Major Data Breach

Meanwhile, Coinbase revealed on May 15 that it had suffered a significant data breach. According to the company, attackers bribed customer service staff in India to gain access to sensitive user data, including names, account balances, and transaction histories.

Approximately 1% of Coinbase’s monthly transacting users were affected by the breach, including Sequoia Capital managing partner Roelof Botha.

Following the breach, Coinbase faced a flurry of lawsuits. At least six legal complaints were filed on May 15 and 16, with plaintiffs accusing the exchange of inadequate security measures and a mishandled response to the incident.