In a filing to the Supreme Court, the U.S. government asserted that Coinbase user James Harper lacks the legal grounds to prevent the IRS from obtaining his cryptocurrency records.
The U.S. government has requested that the Supreme Court decline to hear a challenge brought by a Coinbase user opposing the Internal Revenue Service’s (IRS) attempt to access his cryptocurrency transaction history.
In a May 30 filing, Solicitor General D. John Sauer contended that Coinbase user James Harper cannot invoke Fourth Amendment protections to block access to his financial records stored by the exchange.
The government asserted that Harper had “voluntarily” provided his information to Coinbase, and that the IRS acquired the data through a court-approved summons, in accordance with established legal procedures.
Harper’s case stems from a 2016 IRS probe into significant tax underreporting related to cryptocurrency profits. During the investigation, the IRS identified a notable discrepancy between the large number of Coinbase users trading Bitcoin and the small portion of taxpayers who declared their crypto earnings.
In reaction to these findings, the IRS secured a “John Doe” summons that required Coinbase to provide records related to customers with significant trading activity.
Coinbase User Files Lawsuit Against IRS Over Crypto Records Access
Harper, who engaged in Bitcoin trading on Coinbase during the specified period, eventually filed a lawsuit arguing that the IRS had conducted an unconstitutional search by accessing his personal financial data.
Lower courts rejected Harper’s claims, determining that the records held by Coinbase are considered business documents rather than his personal files, and concluded that the IRS acted within its legal authority.
In its brief, the government maintained that existing Supreme Court precedent backs the IRS’s stance. Referring to cases like United States v. Miller, officials stressed that individuals do not possess a reasonable expectation of privacy concerning financial records maintained by third-party entities such as Coinbase.
The brief also referenced Coinbase’s privacy policy, which explicitly informs users that their data may be disclosed to law enforcement authorities.
“The petitioner’s arguments, to the extent they were raised in the lower courts, were appropriately dismissed by the court of appeals as both unsupported by this Court’s precedent and lacking in merit,” the government stated.
The Supreme Court has not made a decision on whether it will review the case. If the petition is denied, the First Circuit’s ruling supporting the IRS will remain in effect.
Coinbase Hit by Significant Data Breach
On May 15, Coinbase reported a data breach involving attackers who bribed customer support personnel in India to gain access to confidential user data.
The stolen information consisted of customer names, account balances, and records of transactions. Coinbase verified that the breach affected approximately 1% of its active monthly users. One of the impacted individuals was Roelof Botha, a managing partner at Sequoia Capital.
Coinbase encountered a surge of legal actions after the breach became public, with no fewer than six lawsuits filed on May 15 and 16. The plaintiffs alleged that the exchange neglected to enforce proper security protocols and poorly managed its response to the incident.
