Paradigm Files Brief in Support of Crypto Privacy in IRS Case

Crypto investment firm Paradigm has filed an amicus brief urging the reversal of a district court’s decision in the James Harper lawsuit against the U.S. Internal Revenue Service (IRS).

In an October 20 court filing, Paradigm, supporting Harper’s case, accused the IRS of using a “John Doe” summons to gather the private records of roughly 10,000 Coinbase users.

Paradigm Fights to Protect The Fourth Amendment

The crypto venture capital firm argued that the dismissal of Harper’s complaint could impede the mainstream adoption of blockchain technology.

Paradigm emphasized that privacy is a cornerstone of blockchain technology, contending that user privacy should be safeguarded whether they use crypto exchanges or not. It said:

“The district court erred in concluding that there is no expectation of privacy when a person transacts on a crypto exchange. As suggested by the prefix “crypto”—derived from the space’s origins in cryptography—privacy is a foundational pillar of crypto transactions. There are many valid reasons why crypto users want to maintain some privacy—a user may, for example, want to keep hidden his or her participation in social movements, such as support for Ukraine’s defense against Russian aggression.”

Earlier this year, a U.S. judge upheld the IRS access to a John Doe summons. The ruling would allow the financial watchdog to access information about U.S. Coinbase customers who had used the platform between 2013 and 2015.

A John Doe summons is unique because it doesn’t target a specific individual but a group with certain characteristics. This action by the IRS was prompted by suspicions that some Coinbase users had not accurately reported their income, thus failing to disclose taxable transactions.

Harper later took legal action against the financial regulator in 2020. Harper alleged that the IRS had violated his privacy by obtaining his financial records without first confirming his identity, notifying him of the summons, or providing an opportunity to challenge it.

Meanwhile, this is not the first time Paradigm has filed an Amicus Curiae supporting a crypto cause. The exchange has filed similar briefs, supporting crypto firms like Binance, Coinbase, and Terra in their cases against the U.S. Securities and Exchange Commission (SEC).

DEF Files Similar Brief

A separate filing from cryptocurrency advocacy group the DeFi Education Fund (DEF) supported Harper’s appeal against the IRS.

The group said the Court must consider the core differences between crypto technology and TradFi because blockchain data provides the government with an intimate view into a person’s financial life in the past, present, and future.

It further argued that:

“When old precedents meet new technology, courts must ‘assure preservation of that degree of privacy against government that existed when the Fourth Amendment was adopted.”

In an October 20 post on X (formerly Twitter), the chief legal officer of DEF, Amanda Tuminelli, said:

“Our amicus focuses on the 4A questions this type of collection raises for American citizens engaging with digital assets, especially where the government appears to be on a fishing expedition with no specific target in mind.”