As the Internal Revenue Service continues its efforts to force Coinbase to turn over its customers’ transaction records and account details, a Department of Justice lawyer indicated on Thursday that the agency may narrow its information request. According to a report in The Recorder, attorney Amy Matchison suggested that the IRS would not be seeking those customers’ account security setting details or passwords.
That revelation came during a hearing presided over by U.S. Magistrate Judge Jacqueline Scott Corley. Matchison reportedly told Corley that the IRS plans to moderate its demands by seeking only those records it needs to identify potential unreported earnings. Her comments were the latest attempt by the IRS to prevent Coinbase customers from intervening in the ongoing battle over the release of their exchange account information.
In recent months, the IRS has repeatedly worked to prevent the exchange’s customers from intervening on their own behalf. Earlier this year, the agency argued against a motion by Berns Weiss LLP Managing Partner and Coinbase customer Jeffrey K. Berns by withdrawing their request for his account information. The agency noted that he had identified himself as a Coinbase user simply by filing the motion.
Berns Weiss attorney Lee Weiss represented the two John Doe Coinbase users opposing the IRS summons in Thursday’s hearing. The tax agency continues to argue that Coinbase is the only party with standing to resist the John Doe summons, based on the agency’s interpretation of Congressional statutes. The IRS has also suggested that those customers cannot prove that they would be subject to any real injury if the agency obtained their information.
The judge in the case expressed her concerns about the agency’s resistance to these motions to intervene, noting, "I have to say I find it troubling that the IRS is working so hard just to keep them from having their voice heard." Corley also refuted the idea that there was no way to show “actual injury” by suggesting that there could be injury if Coinbase ended up releasing details that the tax agency had no right to obtain.
There was an additional revelation from the exchange’s attorney, as Coinbase acknowledged that it is preparing its own filing in the case. Meanwhile, the IRS has apparently failed to respond to a letter from Congress demanding accountability from the tax agency. That letter questioned the "overly broad, extremely burdensome, and highly intrusive” nature of the IRS investigation.