IRS vs. Crypto Entrepreneur: Is Your Financial Privacy at Risk?

IRS Seeks Dismissal of Crypto Entrepreneur’s Tax Summons Challenge

The Internal Revenue Service (IRS) has formally requested a federal appeals court to dismiss a lawsuit filed by Roland Andrade, a cryptocurrency entrepreneur, who is contesting the tax summons issued against him. Andrade’s complaint centers around his claim that he did not receive adequate notification before the IRS sought access to his private financial records.

Background of the Dispute

The issue originated in 2021 when the IRS launched an investigation into Andrade’s company, ABTC Corporation, due to concerns about irregularities in financial reporting and potential violations of the Bank Secrecy Act. In May of 2023, the IRS issued subpoenas to financial institutions, including Bank of America and JPMorgan Chase, seeking detailed information on Andrade’s and his company’s financial dealings. Andrade claims that he was not properly notified beforehand, which he argues is a violation of the Right to Financial Privacy Act.

Subsequently, his legal counsel learned about these subpoenas through unofficial channels and requested official copies. The IRS then reissued the subpoenas in September 2023, sending notifications to Andrade’s business address. However, these mailings were returned as undeliverable the following month, further complicating the situation.

Details of the Legal Proceedings

In February 2024, Andrade initiated legal action in Texas, seeking a court declaration that the IRS’s actions were invalid due to alleged violations of the Right to Financial Privacy Act. However, in May 2024, a district court sided with the IRS, determining that the agency had met the legal requirements by reissuing the subpoenas and notifications. The court also stated that the matter was largely moot because the banks had already provided the requested documentation to the IRS.

Andrade appealed this decision to the Fifth Circuit in August 2024, seeking a temporary restraining order to prevent any further examination of his banking records by the IRS.

On February 10, 2025, the IRS and the Department of Justice jointly submitted a legal brief, arguing that the appeals court lacked jurisdiction because no formal lawsuit had been filed against Andrade. They asserted that the IRS had acted lawfully in all its actions, negating any basis for compensatory claims.

Future Developments to Watch

It remains to be seen whether the Fifth Circuit will rehear the case or affirm the lower court’s decision. The outcome will have significant consequences for the ongoing regulatory scrutiny of financial activities within the cryptocurrency sector.

Andrade’s Prior Legal Issues

This is not Andrade’s first encounter with regulatory bodies. In 2020, while serving as CEO of NAC Foundation, he was accused by the Securities and Exchange Commission of conducting an unregistered securities offering through the AML Bitcoin token. The SEC alleged that his actions misled investors and violated securities laws.

Broader Implications for the Cryptocurrency Industry’s Regulatory Landscape

This legal challenge comes at a time when the IRS is increasingly focused on the cryptocurrency industry. Last year, industry organizations such as the Blockchain Association and the Texas Blockchain Council challenged new IRS regulations mandating detailed reporting of crypto transactions by brokers. Critics contend that these regulations are at odds with the fundamental principles of decentralization and privacy inherent in cryptocurrencies, potentially placing undue burdens on those active in the market.

In an environment of heightened regulatory scrutiny, this dispute underscores the tension between innovative financial technologies and governmental oversight, serving as a crucial indicator for the future of the global cryptocurrency industry.