The U.S. Internal Revenue Service (IRS) has been granted the authority to issue a ‘John Doe’ summons to M.Y. Safra Bank, a court in New York ruled on Thursday. The summons will oblige the bank to produce information about customers who may have failed to report and pay taxes on crypto transactions through prime dealer SFOX.
In its petition in support of the summons, the IRS pointed to “significant tax compliance deficiencies” related to cryptocurrency transactions made through the SFOX platform.
“Taxpayers who transact with cryptocurrency should understand that income and gains from cryptocurrency transactions are taxable,” U.S. Attorney Damian Williams said in a statement, adding that the information sought by the summons “will help to ensure that cryptocurrency owners are following the tax laws.”
SFOX, which has over 175,000 registered users who have collectively undertaken more than $12 billion in transactions since 2015, connects crypto exchanges, over-the-counter (OTC) virtual currency brokers, and liquidity providers.
M.Y. Safra Bank partnered with SFOX in 2019 to offer its customers cash deposit accounts backed by the Federal Deposit Insurance Corporation, with users being able to use those accounts to buy and sell digital assets.
“The government’s ability to obtain third-party information on those failing to report their gains from digital assets remains a critical tool in catching tax cheats,” said IRS Commissioner Charles Rettig.
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