IRS targets SFOX users for possible tax crimes

Quick Take

  • The IRS can serve a John Doe summons on SFOX, a cryptocurrency prime dealer, according to a new court order announced Tuesday.
  • A judge found there is a “reasonable basis” to believe individuals who conducted $20,000 in crypto transactions using SFOX may have failed to comply with federal tax laws.
  • The order does not allege any wrongdoing by SFOX.

The IRS can serve a John Doe summons on crypto prime dealer SFOX, according to an order entered by a federal district in California on Monday.

The order allows the agency to seek information about taxpayers in the United States who conducted at least $20,000 in crypto transactions between 2016 and 2021 using SFOX.

The court order allows the IRS to serve a John Doe summons on SFOX to “obtain information about possible violations of internal revenue laws by individuals whose identities are unknown,” according to a release. The suit, announced by the US Justice Department on Tuesday, does not allege any wrongdoing by SFOX’s digital currency business. 

A John Doe summons "does not identify the person with respect to whose liability the summons is issued," according to the IRS. The agency can use the summons in an investigation of a specific unidentified person, or a group of class of people. 

“The information sought by the summons approved today will help to ensure that cryptocurrency owners are following the tax laws,” Deputy Assistant Attorney General David Hubbert, a member of the Justice Department’s Tax Division, said in a statement. 

Taxpayers could use crypto transactions to hide taxable income from the IRS, according to the Justice Department. US District Court Judge Otis Wright found in the court order that there is a “reasonable basis” for believing those who conducted at least $20,000 in crypto transactions could have failed to comply with federal tax laws. 


© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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Stephanie covers policy and regulation. She is based in Washington, D.C.