The US Government asks a court to dismiss a lawsuit by a Coinbase user seeking to block access to their crypto transaction records
In a Supreme Court filing, the United States government contends that James Harper, a Coinbase user, has no authority to prevent the IRS from accessing his crypto records.
The United States government has advised the Supreme Court to decline to address a Coinbase user’s appeal against the Internal Revenue Service’s (IRS) attempt to obtain his crypto transaction records.
In a filing dated May 30, Solicitor General D. John Sauer contended that James Harper, a Coinbase user, does not possess a Fourth Amendment right to protect his financial records held by the exchange.
The government asserted that Harper “voluntarily” disclosed his data to Coinbase and that the IRS adhered to judicially approved legal procedures to acquire it through a summons.
Harper’s case is predicated on a 2016 IRS investigation into the pervasive underreporting of cryptocurrency gains for tax purposes. The IRS at that time identified a significant disparity between the relatively small number of taxpayers who reported crypto gains and the millions of Coinbase users who traded Bitcoin.
The agency responded by obtaining a “John Doe” summons, which required Coinbase to disclose information regarding its high-volume customers.
A user of Coinbase has filed a lawsuit against the Internal Revenue Service (IRS). Harper, who traded Bitcoin on Coinbase during the relevant years, subsequently filed a lawsuit, asserting that the IRS’s actions constituted an unconstitutional search of his confidential records.
The IRS acted lawfully, and the lower courts disagreed, ruling that Coinbase’s records are business documents rather than Harper’s private papers.
The government contended in its brief that the IRS’s stance is supported by Supreme Court precedent. The government underscored that individuals have no reasonable expectation of privacy in financial records held by third parties, specifically Coinbase, citing past cases such as United States v. Miller.
The filing also referenced Coinbase’s privacy policy, which cautioned users that their information could be shared with law enforcement.
“The court of appeals correctly rejected the arguments made by the petitioner below, as they were both foreclosed by this Court’s precedent and meritless,” the government stated.
The Supreme Court has not yet determined whether or not it will consider the case. A denial would maintain the First Circuit’s ruling in favor of the IRS.
A significant data compromise has occurred at Coinbase.
On May 15, Coinbase disclosed a data breach in which assailants bribed customer support staff in India to gain access to sensitive user information.
The stolen data was the customer names, account balances, and transaction histories. Coinbase verified that the incident affected approximately 1% of its monthly transacting users. Roelof Botha, the managing partner of Sequoia Capital and a venture capitalist, was among those impacted.
Additionally, Coinbase encountered an influx of lawsuits after the disclosure. The plaintiffs accused the exchange of failing to implement sufficient security measures and mishandling its response to the breach in at least six legal complaints lodged on May 15 and 16.
