Not so fast. That was the response this week from a Coinbase customer who filed a motion in federal court seeking to block the Internal Revenue Service (IRS) from issuing a "John Doe" summons on Coinbase. The "John Doe" summons seeks to identify all United States Coinbase customers who transferred convertible virtual currency from 2013 to 2015. Coinbase, which is headquartered in San Francisco, California, is a company which facilitates transactions of digital currencies like Bitcoin and Ethereum.
The Department of Justice (DOJ) made the initial request last month (California Northern District Court, Case No. 3:16-cv-06658-JSC) on behalf of the IRS since a "John Doe" summons can only be served by the IRS with federal court approval. A "John Doe" summons is an order that does not specifically identify the person but rather identifies a person or ascertainable group or class by their activities.
The request was granted about a week later by Judge Jacqueline Scott Corley who found that "[b]ased upon a review of the Petition and supporting documents, the Court has determined that the “John Doe” summons to Coinbase, Inc. relates to the investigation of an ascertainable group or class of persons, that there is a reasonable basis for believing that such group or class of persons has failed or may have failed to comply with any provision of any internal revenue laws, and that the information sought to be obtained from the examination of the records or testimony (and the identities of the persons with respect to whose liability the summons is issued) are not readily available from other sources."
The motion filed today in San Francisco seeks to quash the summons. In the law, a motion to quash a summons means that the moving party (the person who files the motions) is asking the judge to set aside a prior action. In this case, the moving party is Jeffrey K. Berns, the Managing Partner of Berns Weiss LLP, who estimates that over a million Americans may be subject to the IRS summons. Berns is not only the partner of a law firm which focuses on technology, including virtual currencies: he is also a Coinbase user who has bought and sold bitcoins.