United States v. Payward Ventures, Inc. (Kraken), Order granting in part IRS John Doe summons petition, No. 3:23-mc-80029, Dkt. 34 (Part 2 of 2)
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Research, not advice. Part of the Bitcoin research archive (October 2026). Claims labelled unverified, contested or fringe are reported, not endorsed; statuses of bills and rules are as of the date checked. Government, court and patent records are public domain; the research notes are CC BY 4.0.
13 to the account holder. 17
14 The Court therefore finds that the relevant documents in Request Nos. 1-3 are those listed
15 in Request No. 1(a), which must be produced. The items in Request Nos. 1(b)-(d), Request 2 and
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16 Request 3 are not relevant at this stage of the Government’s investigation.
17 d. Requests Four and Five (Transactional Information)
18 i. Background
19 Request Nos. 4 and 5 are aimed at users’ transactions. In particular, Request Four seeks
20 records relating to the following account activity: a) date, time and amount of users’ purchases or
21 sales of cryptocurrency for fiat currency (that is, U.S. dollars or foreign legal tender); b) date,
22 time and value of any lending, borrowing or margin position entered into the account; c) date and
23 time, amount, U.S. dollar value, transaction hash (ID), and blockchain addresses of any
24
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25 Because the Court finds that of the first three requests only Request 1(a) is relevant, and Kraken
does not assert that production of that information will be overly burdensome, the Court need not
26 address Kraken’s arguments relating to the burden of producing the information requested in
Request Nos. 1(b)-(d), Request 2 or Request 3. The Court also need not reach whether Request
27 No. 1(b)-(d) is overbroad for the additional reason that these requests contain no time restriction.
Although Kraken brings the same challenge to Request Nos. 4 and 5, the Government has
28 stipulated that it only seeks records of account funding and activity for the period covered by
summons, January 1, 2016, to December 31, 2020. Kraken II, Cincotta Reply Decl. ¶¶ 99-100.
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1 cryptocurrency units transferred into or out of a Kraken account from another Kraken account or
2 from outside Kraken; and d) cryptocurrency received in the account as the result of “a
3 chainsplitting event such as a hard fork or promotional event.” Request Five seeks records
4 relating to account funding, that is, all deposits, withdrawals, or transfers in U.S. dollars or foreign
5 legal tender, as well as “invoices, billing statements, receipts, or other documents memorializing
6 and describing such transactions.”
7 Kraken’s Contentions
8 Kraken objects to both requests on the grounds that they do not contain temporal
9 limitations. Kraken II, Opposition at 22, 23. It also challenges Request No. 4(c) as overbroad
10 because it seeks “transaction hash (ID)” and “blockchain addresses[.]” Id. at 22. As to the former,
11 Kraken contends the Government does not justify its need for this information and points out that
12 in Coinbase, the Government did not request it. Id. As to the blockchain addresses, Kraken
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13 argues that this information is similar to the wallet addresses that the Government requested as
14 identity information in Coinbase and the court found to be irrelevant and overbroad. Id. (citing
15 Coinbase, 2017 WL 5890052, at *6).
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16 Kraken also argues that production of the information sought in Request No. 4 would be
17 extremely burdensome, in part because of the lack of date restrictions and in part because of
18 specific challenges associated with this request. Id. In particular, with respect to 4(d),
19 Kraken asserts that its “transactional data would reflect all executed transactions, but
20 ‘chainsplitting event[s]’ are not specifically demarcated as those particular events.” Id. at 23
21 (citing Siemers Decl. ¶ 30). 18 Likewise, it asserts, “[w]ith respect to 4(c), ‘transaction hash (ID)’
22
18
23 Siemers states as follows:
24 I understand that the IRS is specifically requesting information from all executed
transactions, specifically “lending, borrowing, or margin position” data, along with data relating
25 to the receipt of cryptocurrency resulting from a “chainsplitting event such as a hard fork or
promotional event.” Kraken’s transactional ledgers for each account include any deposits,
26 withdrawals, or transfers of cryptocurrency conducted by the account, which would reflect any
lending, borrowing or margin position that resulted in a completed transaction. It would also
27 capture transactions resulting from chainsplitting events such as forks or “airdrops” that resulted
in digital assets being credited to the account. However, chainsplitting events are not specifically
28 identified as such in the transaction ledgers. For example, depending on the details of the
chainsplitting event and how that event was handled by Kraken, corresponding transactions may
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1 and ‘blockchain addresses’ for transfers will not be reflected in the transactional ledger.” Id.
2 (citing Siemers Decl. ¶ 31). 19 Therefore, Kraken asserts, it cannot provide “complete and accurate
3 data regarding the transaction hashes and blockchain addresses on a transaction-by-transaction
4 basis” and it would “have to develop searching tools above and beyond what it employs in
5 the normal course of business” to comply with Request No. 4(c). Id. It further represents that
6 “because blockchain addresses are not part of a transactional ledger, such data would have to be
7 pulled on an account-level basis, which would be a time consuming and expensive process.” Id.
8 Kraken acknowledges that it is “currently working to backfill transaction hashes or blockchain
9 addresses into its transaction data” but “does not expect to be able to provide this data completely
10 and accurately for at least several months.” Id.
11 As to Request No. 5, Kraken acknowledges that “the transactional ledgers Kraken
12 maintains for each account include deposit, withdrawal, and transfer activity and necessarily
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13 reflect account funding” but contends that the request is overbroad and unnecessarily burdensome
14 to the extent it “seeks records beyond those ledgers.” Id. at 23. According to Kraken, “[b]asic
15 transactional data should be enough to establish whether a potentially reportable gain exists and
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16 who is responsible for that gain.” Id. (citing Coinbase, 2017 WL 5890052, at *7). Kraken
17 represents that it “does not keep record[s] of account funding in the same manner in which user
18 profile or transactional data is stored” and “its systems are not natively designed to handle a global
19 query into or collection of this information across identified users.” Id. (citing Siemers Decl.
20
21 be captured as deposits, transfers, or adjustments to the account.
22 Siemers Decl. ¶ 30.
19
Siemers states:
23
I understand that the IRS is requesting data related to “transaction hash (ID)” and “blockchain
24 addresses” for cryptocurrency transactions. Like payments methods, the transaction history ledgers
that Kraken maintains for each account do not include the transaction hash or blockchain
25 addresses on a transaction-by-transaction basis. Thus, Kraken’s systems are not natively designed
to handle a global query or collection of such information. Kraken is currently working to backfill
26 transaction hashes or blockchain addresses into its transaction data, but that work is ongoing. At
this time, Kraken cannot provide complete and accurate data regarding the transaction hashes and
27 blockchain addresses on a transaction-by-transaction basis. Kraken does not expect to be able to
provide this data completely and accurately for at least several months, if not longer.
28
Siemers Decl. ¶ 31.
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1 ¶ 32). 20 Therefore, it asserts, “[t]o extract account funding activity, Kraken would have to design
2 a new search query to collect that data on an account-level basis[,]” which it estimates “would take
3 approximately two full data analyst days to develop a tool and extract the data.” Id.
4 Kraken further represents that as to the request for “invoices, billing statements, receipts,
5 and similar documents, [it] does not send invoices, billing statements, or receipts to its users” and
6 thus, “[a]ny documents that may be captured by this request would be individual account records
7 and not globally searchable or extractable.” Id. (citing Siemers Decl. ¶ 33). 21
8 The Government’s Response
9 In its Reply, the Government stipulates that although the summons does not include any
10 temporal limitation as to Request Nos. 4 and 5, it seeks only records in the period covered by the
11 summons, that is, 2016-2020. Kraken II, Reply at 10-11 (citing Cincotta Kraken II, Reply Decl.
12 ¶¶ 99-100). As to the request for transaction hash information and blockchain addresses in
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13
20
14 Siemers states:
15 I understand that the IRS is also requesting production of all records of account funding. As noted
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above, deposits, withdrawals, or transfers to and from an account are reflected in the transactional
16 ledgers associated with each account. Beyond that, the search for and retrieval of any account
funding data would be similar to the process for responding to the request for complete user
17 payment methods. Kraken does not maintain a record of all account funding in the same way
standard transactional data is stored in the ordinary course of business, and its systems are not
18 natively designed to handle a global query into this information on a transaction by-transaction
basis. Kraken would be required to design a search query to collect account funding data on an
19 account-level basis. Based on my knowledge of Kraken’s systems, I estimate it would take . . . at
least two days of work for a full-time data analyst to develop a tool and to search, retrieve, and
20 extract the information.
21 Siemers Decl. ¶ 32.
21
22 Siemers states:
23 I understand that the IRS also requests any invoices, billing statements, receipts, or
other similar documents relating to account funding transactions. It is unclear the full extent of
24 what documents the IRS is seeking based on these descriptions. Based on my knowledge and
experience at Kraken, Kraken does not send invoices, billing statements, or receipts to its users.
25 Any documents that may be captured by this request are individual records and not globally
searchable data. Collection of these documents, to extent they exist, would be a very time
26 consuming and likely require a manual review of each of the 59,331 accounts covered by the IRS
summons. It is difficult to estimate the burden of this request since it is unclear the universe of
27 documents being sought. But as previously stated, even if only a few minutes were required per
account to conduct a manual review, this would lead to thousands of hours of work.
28
Siemers Decl. ¶ 33.
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1 Request No. 4, the Government justifies its need for that information – even though it did not
2 request the former and was not permitted to obtain the latter in Coinbase – on the basis that “the
3 IRS’s understanding of cryptocurrency is evolving and as it develops greater expertise in how to
4 effectively trace transactions on the blockchain its requests for information have evolved too.” Id.
5 at 11 (citing Kraken II, Cincotta Reply Decl. ¶¶ 95-98). 22 It represents that “the IRS can better
6 trace transactions on the blockchain to more accurately determine taxpayer compliance if it has
7 “transaction hash information and blockchain addresses.” Id. To the extent it may take Kraken
8 months to backfill this information into its transaction data, the Government says it is “willing to
9 wait.” Id. And to the extent Kraken’s transactions do not specifically identify transactions that are
10 the result of chainsplitting, the Government states that “production of the raw transaction
11 information is sufficient.” Id.
12
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13 22
Agent Cincotta states:
14
95. Each transaction recorded on the blockchain is identified by a transaction hash (ID). The
15 transaction hash (ID) can be used to retrieve and view the details of a transaction. Transaction
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hash information and blockchain addresses can be used to trace transactions between sending and
16 receiving addresses, which can be used to identify other locations that a taxpayer may hold virtual
currency or to determine whether cryptocurrency was transferred by one taxpayer to another in a
17 potentially taxable transaction. Unlike traditional investment accounts where an account holder is
buying and selling securities entirely within that account, cryptocurrency exchanges generally
18 permit users to deposit and withdraw the cryptocurrency units themselves which allows users to
shift property among multiple accounts for profit-maximization or other reasons.
19
96. The need to identify the existence of other accounts owned by a user and to trace the
20 movement of cryptocurrency to those accounts makes calculating a taxpayer’s gain for tax
compliance purposes extremely difficult. The IRS needs to know this information to identify what
21 other places the user is holding cryptocurrency so it can gather as much information as possible to
make a determination regarding the user’s tax compliance.
22
97. To evaluate this information to determine the proper tax characterization of the transactions
23 and whether a user is in tax compliance, the IRS needs this transactional information, including
the date and time of the transaction, cryptocurrency involved, amount of cryptocurrency involved,
24 U.S. dollar value, transaction hash (ID), and blockchain addresses.
25 98. Transaction hash (ID) and blockchain addresses were not requested in the John Doe summons
issued to Coinbase, because, at the time such requests were formulated, the IRS’s knowledge of
26 cryptocurrency technology and the data needed to effectively trace cryptocurrency transactions
was still developing. Without transaction hash (ID) and blockchain address information, the IRS’s
27 ability to trace transactions was limited. Analytical software the IRS uses is less effective in
tracing transactions without transaction hash (ID) or blockchain addresses,
28
Kraken II, Cincotta Reply Decl. ¶¶ 95-98.
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1 As to Request No. 5, the Government states that it has sufficiently established its need for
2 account funding information because this information will help “the IRS make the most informed
3 decision on compliance.” Id. (citing Kraken II, Cincotta Petition Decl. ¶ 147 23; Kraken II,
4 Cincotta Reply Decl. ¶¶ 102-106). 24 As to Kraken’s representation that it does not send invoices,
5 billing statements or receipts to its users, the Government states that “[t]he IRS is not asking
6 Kraken to create any information, so if this information does not exist, then the IRS recognizes it
7
8 23
Agent Cincotta states:
9
Summons request number 5 reflected on Exhibit A seeks all records of account funding
10 transactions relating to the deposit, withdrawal, or transfer of fiat currency. The IRS uses this
information to understand how a user is funding his or her purchases of cryptocurrency and where
11 money may be getting sent after units are sold. This information is evaluated against other
information in the IRS’s possession and reported on the user’s tax returns to make the most-
12 informed decision the IRS can on whether an individual is complying with the internal revenue
laws.
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13
Kraken II, Cincotta Petition Decl. ¶ 147.
24
14 Agent Cincotta states:
15 102. In my experience as a Revenue Agent, I have been involved in tax examinations where the
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financial status of the taxpayer is difficult to determine. This is more common in cryptocurrency
16 examinations because users of cryptocurrency tend to be younger taxpayers that often have non-
traditional income sources.
17
103. Kraken permits users to fund their accounts with either fiat currency or with cryptocurrency.
18 Understanding how the user’s account was funded and where it was funded from can provide
valuable insight for the IRS when determining whether an individual is in compliance with the
19 internal revenue laws.
20 104. In my experience, information on how a user funds their cryptocurrency account can also be
used to uncover related taxpayers or nominee situations. For example, the IRS conducted
21 examinations of multiple seemingly unrelated taxpayers. Upon receiving summons information
from cryptocurrency exchanges, the IRS was able to identify cross-linked bank accounts—that is,
22 bank accounts of one taxpayer linked to another taxpayer’s cryptocurrency exchange account and
vice versa. Learning this information changed how the IRS approached the separate examinations
23 and changed how the IRS approached any tax adjustments in the examinations.
24 105. Knowing the source of funds when initially reviewing a taxpayer’s account information can
provide important insight into determining whether an individual is in tax compliance. A taxpayer
25 with minimal reported income and numerous linked funding sources is more likely to not be in
compliance with the internal revenue laws.
26
106. Also, a taxpayer with funding sources that are not in his own name is more likely to not be in
27 compliance.
28 Kraken II, Cincotta Reply Decl. ¶¶ 102-106.
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1 cannot be produced.” Id.
2 Finally, the Government rejects Kraken’s challenges based on undue burden, as discussed
3 above. Id.
4 ii. Discussion
5 Request No. 4
6 Based on the Government’s Reply, a number of Kraken’s challenges to this request appear
7 to be moot: the Government has clarified that it will cover only the period January 1, 2016
8 through December 31, 2020; it has stipulated that it is willing to wait for Kraken to complete a
9 process that is already underway of backfilling transaction hashes and blockchain addresses into
10 the transaction data; and in connection with Request No. 4(d), it will accept the raw data even
11 though it does not specifically demarcate chainsplitting transactions. The primary challenge that
12 remains is Kraken’s assertion that that Government has not adequately supported its request in
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13 Request No. 4(c) for “transaction hash (ID)” and “blockchain addresses.” The Court finds,
14 however, that the Government’s evidence is sufficient to demonstrate its need for this information.
15 In particular, Agent Cincotta explains that the IRS’s understanding of how to trace cryptocurrency
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16 transactions has evolved since Coinbase and that the “[a]nalytical software the IRS uses is less
17 effective in tracing transactions without transaction hash (ID) or blockchain addresses.” Kraken
18 II, Cincotta Reply Decl. ¶ 98. Therefore, the Court concludes that this request is not overbroad.
19 Nor is it unduly burdensome – at least to the extent Kraken has already begun a process of
20 “backfilling” this information into its records such that it can be retrieved without manually
21 searching each individual record. 25
22 Request No. 5
23 Apart from its challenge to the definition of “user,” Kraken does not dispute that the
24 Government’s request for Kraken’s transactional ledgers is narrowly tailored. The Government’s
25
25
26 As Kraken’s witness indicates that this process is likely to be complete in a matter of months
and the Government has stated it is willing to wait that long, the Court declines to reach whether
27 any additional remedy might be appropriate down the road if, for example, the process is slower
than expected or is discontinued by Kraken. The parties may raise that issue with the Court should
28 Kraken not produce this information within the next 6 months. However, the parties shall meet
and confer and attempt to resolve the issue before raising it with the Court.
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1 request sweeps more widely, however, asking for all records reflecting such transactions. The
2 Government has not explained why this additional information is necessary. Neither has it
3 challenged the accuracy or completeness of Kraken’s transactional ledgers. Therefore, the Court
4 concludes this request is overbroad to the extent it seeks records that go beyond Kraken’s
5 transactional ledgers.
6 IV. CONCLUSION
7 For the reasons stated above, the Court GRANTS the Petition in part and orders that
8 Kraken shall produce the following documents for Kraken users with any combination of accounts
9 having at least the equivalent of $20,000 in value of transactions (regardless of type) in
10 cryptocurrency in any one year, for the period January 1, 2016 through December 31, 2020:
11 1. Name (including full name, any pseudonym, or any user ID);
12 2. Date of Birth;
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13 3. Taxpayer Identification Number;
14 4. Physical Address;
15 5. Telephone Number;
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16 6. Email Address;
17 7. All documents described in Request No. 4 for the period January 1, 2016 through
18 December 31, 2020 except that: a) Kraken shall only be required to produce transaction hash (ID)
19 and blockchain addresses to the extent that information has been or is in the future backfilled into
20 its transaction data; and b) as to Request 4(d), Kraken may produce raw data even though it does
21 not specifically demarcate chainsplitting transactions.
22 8. All transactional ledgers responsive to Request No. 5 for the period January 1, 2016
23 through December 31, 2020.
24 In all other respects the Petition is DENIED.
25 The Court also denies the parties’ administrative motions to file under seal for the reasons
26 stated above. The material that has been provisionally filed under seal in this case shall be
27 filed, in unredacted form, in the public record. Each party is responsible for filing in the
28 public record the sealed documents attached to its sealing motion.
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1 IT IS SO ORDERED.
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3 Dated: June 30, 2023
4 ______________________________________
JOSEPH C. SPERO
5 United States Magistrate Judge
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