Court Rules in Favor of IRS in Coinbase Documents Seizure Case

In a significant ruling, a federal judge in New Hampshire has dismissed a lawsuit brought against the Internal Revenue Service (IRS) challenging the agency’s procurement of financial records from cryptocurrency exchange Coinbase. U.S. District Judge Joseph N. Laplante concluded that the IRS did not violate the constitutional rights of the plaintiff, James Harper, as he had claimed.

IRS Access Of Coinbase Valid

Harper’s lawsuit alleged violations of due process and protections against unreasonable searches and seizures. However, Judge Laplante dismissed the case, stating that Harper’s rights were not infringed upon and that the existing safeguards and checks on the IRS’s powers were sufficient.

The court’s decision has drawn attention to the broader implications for taxpayer privacy and the IRS’s power to access financial records from third-party intermediaries, including cryptocurrency exchanges.

In the order issued on Friday, Judge Laplante noted,

“The IRS’s actions at issue in this case fall squarely within that broad latitude, and Harper is not entitled to protection or relief beyond the existing congressionally and judicially imposed ‘safeguards’ and checks on the IRS’s powers.”

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Why Lawsuit Is Dismissed?

The judge’s ruling was based on several key findings. First, Harper did not have a privacy interest in the records under the Fourth Amendment since he voluntarily provided his information to Coinbase, which explicitly warned of potential disclosure to the government in its privacy policy.

Second, Harper’s claims of denial of procedural due process under the Fifth Amendment were dismissed, as there were opportunities to challenge or narrow the IRS’s summons.

Richard A. Samp of the New Civil Liberties Alliance, representing Harper, expressed plans to challenge the court’s conclusion, stating,

“Friday’s district court decision essentially removes all constraints on the IRS’ power to seek a taxpayer’s financial records from third-party record holders… That is not what Congress and the drafters of the constitution intended.”

Representatives for the U.S. Department of Justice, Tax Division has not commented on the ruling.