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The Almighty Buck Bitcoin Government The Courts United States

Legal Sparring Continues in Bitcoin User's Battle with IRS Tax Sweep (fortune.com) 101

In a strange twist, Coindesk reports that the IRS has, somewhat indirectly, removed one target from its broad request for data about U.S. users of the Bitcoin exchange Coinbase. It no longer wants data about Jeffrey Berns, a lawyer who also happens to be fighting the IRS's "John Doe" request in court. From a report on Fortune: Berns originally filed a motion on December 13th asking the U.S. District Court for Northern California to stop the IRS' subpoena of Coinbase records. The IRS believes that its request, filed in November, is justified because Bitcoin owners "may fail, or may have failed, to comply with one or more provisions of the internal revenue laws." Berns is represented by his own law firm, Berns Weiss, whose motion argues that the IRS data search is "an abuse of process" and "overbroad." Berns has said his motion is intended to defend not only himself, but all targeted users. But according to a December 28th court filing by the IRS, Berns is no longer a target of its records request because he identified himself in his own filing, and the request is only for unidentified users. Therefore, the IRS argues, Berns is not a party to proceedings and his request to block the data grab should be thrown out of court. In response, Berns Weiss had its own spin, telling Coindesk that "The IRS's willingness to withdraw the summons as to Mr. Berns only because it is now aware of his identity," and without the additional information they're seeking about many other Coinbase users, "Makes it clear that the IRS does not have a legitimate purpose in seeking substantial personal and financial information concerning approximately 3 million Americans."
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Legal Sparring Continues in Bitcoin User's Battle with IRS Tax Sweep

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  • In Short (Score:3, Informative)

    by Anonymous Coward on Monday January 02, 2017 @07:08PM (#53594433)

    In U.S. law, only someone who is involved in the conflict may ask the courts to resolve the matter in a particular way. The IRS then essentially removed this lawyer from the conflict; because the lawyer no longer meets the requirements for participating in the matter, the IRS is asking his petition to the courts to be rejected.

    Slick. And Stupid.

    • Also futile by the IRS, because the alleged mootness is due to "voluntary cessation" by the IRS, which does not moot the underlying case or controversy, and also because the IRS is obviously repeating the behavior (and the possibility of repetition is another bar to mootness).

    • And just because he's identified doesn't mean that his records are no longer involved. If they end up with his data in the end, then he still has a right to be involved.

      • If the IRS public position is that the request only covers unidentified individuals does that mean anyone can send certified mail to the IRS indicating they used coinbase and be excluded from the request without anything further being sent to the IRS?
    • by pla ( 258480 )
      In U.S. law, only someone who is involved in the conflict may ask the courts to resolve the matter in a particular way.

      In U.S. law, "no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things".

      But please, keep trying to suck Officer Friendly's cock; he'll no doubt cut you some slack when he eventually gets around to figuring out what (not "if") crime you're guilty of.
    • by SeaFox ( 739806 )

      The IRS then essentially removed this lawyer from the conflict; because the lawyer no longer meets the requirements for participating in the matter, the IRS is asking his petition to the courts to be rejected.

      Slick. And Stupid.

      Nice try, IRS. But there's nothing to stop the John Does from contacting Berns and asking his firm to represent them, which he can agree to do pro bono. Once he's legally representing the others you can't shoo him away so easily.

      • Re:In Short (Score:5, Interesting)

        by sir-gold ( 949031 ) on Monday January 02, 2017 @10:24PM (#53595151)

        But those John Does would have to prove legal standing (by proving they were specifically targeted), and by identifying themselves, would then lose the legal standing they had gained, same as what happened to the lawyer.

        The government has been very careful to make sure nobody can use the legal system against them. They have set up a catch-22 situation where establishing standing causes a loss of standing, so that literally nobody has the right to sue.

        • So then they should DDOS the legal system by having all BitCoin holders affected by the behavior of the IRS file individual suits against the government.
        • Right, sounds like all you have to do is identify yourself and thereby, according to the IRS, prevent Coinbase from including you in anything they disclose. If everyone who had an account in that period does so coinbase would be required to turn nothing over to the IRS.
          • by SeaFox ( 739806 )

            Plot twist: Everyone reveals themselves as Coinbase clients with Berns as their counsel.
            The IRS either loses all their John Does and has nothing, or has to prove they weren't just fishing the whole time.

        • by SeaFox ( 739806 )

          That occurred to me. I would suggest Berns should be able to represent them without having to make their identities known to the prosecution, as long as he can prove to the court they did agree to have him represent them. If the IRS is looking for "John Does" eventually they will have to request information on them. If the IRS can bring a case against people it cannot name to the court, why can't Berns defend them under the same level of anonymity?

          Once the IRS reveals their list of people, Berns can come fo

          • I did some research on the idea of suing anonymously. and it's generally not allowed (you have the right to face your accuser in court, which means you have a right to know who your accuser is). However, judges do have the authority to keep the plaintiffs name secret from the defendant in special circumstances (such as threat of bodily harm). The guidelines for allowing it also vary from state to state.

            They would have to file a motion for it, and they would have to make a case that plaintiff anonymity is ne

    • Re:Roe vs Wade (Score:3, Interesting)

      by hackwrench ( 573697 )
      The IRS is trying the same legal tactic Wade tried in Roe vs Wade, when it said that Roe was no longer a party because she had given birth and was no longer pregnant to be a candidate to have an abortion. The Supreme Court disagreed.
    • by hAckz0r ( 989977 )
      How would a Class Action suit stack up against the 'overly broad' request? Should they not be required to show justification for each request? How is this any different than a bulk search and seizure of personal banking statements without a warrant stating what specific activity is even being searched for?
  • Sounds fair... (Score:5, Insightful)

    by Anonymous Coward on Monday January 02, 2017 @07:13PM (#53594457)

    So the IRS's argument is that, as soon as someone identifies themselves by suing them to prevent this release of data, they'll remove that person from the data grab request so they no longer have standing to sue them, and get the case thrown out?

    Hey America, there's this concept called 'justice'. You knew about it, once.

    • Which "America" are you addressing? The America that the IRS represents, or the America that the courts represent?
      • Since neither of those America's represent most of us real people I'm going with the same group of us vote for... none of the above.
    • Re:Sounds fair... (Score:5, Insightful)

      by mysidia ( 191772 ) on Tuesday January 03, 2017 @09:01AM (#53596895)

      they'll remove that person from the data grab request so they no longer have standing to sue them, and get the case thrown out?

      When it comes to a violation of personal liberty, privacy, and constitutional rights protecting individuals, the concept of "Standing" is bogus and needs to be eliminated. Every American is damaged if personal liberties and privacy are infringed upon by the government.

  • by Anonymous Coward

    Is illegal in this country. Sorry IRS, go F- yourself.

    That someone "might do something wrong" is not a valid reason. If they win this, we are screwed. "show us your papers, and your wallet". You can say good bye to paper money too.

    • by Anonymous Coward

      http://papersplease.org/

      You have *no idea* how deep the state is against you.

      If you had any sense or care about your family and the future you would start rattling the sabers of revolt and not let up until you force the state into submission.

  • by Anonymous Coward on Monday January 02, 2017 @08:10PM (#53594665)

    "may fail, or may have failed, to comply with one or more provisions of the internal revenue laws."

    Excuse me!? First off swap that out with any other situation such as "we need a search warrant to search all of the apartments in a building because one of them may have, or may soon commit a crime" and any judge in the US with their head screwed on straight would laugh it out of court. Secondly even the IRS has I believe admitted that the tax code is so insanely convoluted that not even they can truly define the legal bounds of the tax code. So not only are they asking for sweeping ability to search personal records but they can't even define what laws those people may or may not have run afoul of.

    • by PPH ( 736903 )

      "Show me the man and I'll find you the crime."
      - Lavrentiy Beria

    • ...swap that out with any other situation such as "we need a search warrant to search all of the apartments in a building because one of them may have, or may soon commit a crime" and any judge in the US with their head screwed on straight would laugh it out of court...

      No in the "National Security Court"...

    • by Anonymous Coward

      Look, they're providing a money laundering service. It doesn't matter if you do that with a bank or an investment firm; you have to report the transactions to the IRS. Every other company in the US that's exchanging money has to report the transactions to the IRS. Remember that more of the constitution is about banking than any other thing. You have to pay your fucking taxes. The bitcoin exchanges are pretending that they don't have to comply with banking or investment law. They're wrong.

    • The thing is: These arguments apply equally well to any and all financial information that the IRS receives. Why should your employer be forced to tell the IRS what they pay you? Why should your bank be forced to supply the IRS with account information? All of this is only because the IRS doesn't trust you, the individual taxpayer, to properly file your taxes. It is *all* in violation of the 4th amendment, as far as I can see.

    • Excuse me!? First off swap that out with any other situation such as "we need a search warrant to search all of the apartments in a building because one of them may have, or may soon commit a crime" and any judge in the US with their head screwed on straight would laugh it out of court

      The discovery of tax related documents to the IRS do not work the same way as they do for a criminal court. If the IRS suspects you of dodging your taxes you're guilty until proven innocent, and you can and will be asked to show all documentation to prove your innocence even if there's no evidence that you ever dogged taxes.

      This is what tax audits essentially are. "Prove to us you haven't committed a tax crime"

  • by Anonymous Coward

    And no warrants shall issue except upon PROBABLE CAUSE.

    When your government has routinely violated the very Constitution under which it is supposed to operate,
    and has been doing so for at least the last 15 years completely with rampant disrespect and wanton abandon,
    and refusal to listen and correct its ways,
    it is time for you to overthrow that government.

  • by jfdavis668 ( 1414919 ) on Monday January 02, 2017 @08:19PM (#53594705)
    Enough arguing over bitcoins on /. We need more news about the SCO vs. IBM lawsuit. The future of Linux is in the balance!
  • Therefore, the IRS argues, Berns is not a party to proceedings and his request to block the data grab should be thrown out of court

    Saw that one coming. I believe that it's not the IRS that really wants this data, it's the NSA/CIA, but they can't ask for it. One can always tell when the government is up to no good by how fast they drop someone, or how fast they start with the "no standing" thing.

  • 1 in 100 Americans has not used Coinbase, I doubt its even 1 in 1000.
  • The 4th amendment is there to prevent exactly this type of abuse:

    The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.

    They're asking for the records of everyone who used the exchange, without evidence that any law has been broken. Why hasn't this been thrown out yet?

  • Anyone remember Mt Gox? It announced that around 850,000 bitcoins belonging to customers and the company were missing and likely stolen, an amount valued at more than $450 million at the time. Although 200,000 bitcoins have since been "found", the reason(s) for the disappearance—theft, fraud, mismanagement, or a combination of these—were initially unclear. New evidence presented in April 2015 by WizSec led them to conclude that "most or all of the missing bitcoins were stolen straight out of th
  • All our hard drives crashed and the tape backups cannot be found.

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