If you’re a bitcoin trader or investor, you’ve probably traded on multiple cryptocurrency exchanges and, for the most part, trusted that those exchanges are keeping your data secure from unlawful data collection just like a bank or credit card provider would. Unfortunately, that doesn’t seem to be the case.
On July 15, 2020 (Tax Day this year), New Civil Liberties Alliance (NCLA) filed a lawsuit on behalf of James Harper against the IRS, challenging the agency’s unlawful collection of private cryptocurrency information.
Harper decided to take this action against the IRS after he received a letter from the agency in August 2019 as part of its ongoing effort to alert taxpayers about crypto tax filing requirements. Harper wants to hold the IRS accountable for violating his privacy and identifying him as a cryptocurrency holder.
According to a case summary, “NCLA represents Mr. Harper before the United States District Court for the District of New Hampshire. Mr. Harper’s ‘crime’? Holding a bitcoin wallet. The lawsuit argues that the IRS has acquired the unbridled power to demand and seize Americans’ private financial information from third parties without any judicial process in defiance of the Fourth and Fifth Amendments and statutory protections.”
Some of you reading may even know Harper. He bought his first bitcoin in 2013 and has been an active member of the community ever since. According to the case, he has always paid his applicable taxes and reported his bitcoin trades. Like many of you reading, Harper used a few different cryptocurrency exchanges to conduct his trades, all of which contractually promised to protect his private information.
Last year, Harper became one of 10,000 crypto holders to suddenly receive a letter from the IRS stating that it had obtained his financial records from the cryptocurrency exchanges without any particular suspicious of wrongdoing. Additionally, the IRS failed to meet its statutory duty to give Harper…