Candor is important, so I urge you to watch out for bias and misrepresentation in this post, because it is about a lawsuit I am involved in. Represented by the New Civil Liberties Alliance, I am suing the IRS to get my cryptocurrency transaction information out of its hands, information it summonsed through a dragnet process that we argue is illegal. Success in the case would restore my financial privacy, protect me from investigatory excesses, and—if not too late—protect my private financial information from all-too-regular hacks and leaks. I stand to gain nothing financially.

The Federal Rules of Civil Procedure require pleadings and motions to be served on every party to a lawsuit. Justice is hard to serve if affected parties do not know what is happening in their cases. When a person has no known address, Rule 5(b)(2)(D) says that filings can be left with the court clerk. 

Now imagine that a lawyer leaves filings with the clerk, saying that they do not have any address where they can serve an opposing party. “We asked for that, but we didn’t get it,” the attorney tells the court. So the litigant doesn’t get notice of key events in the case. All the attorney has is a Plus Code. 

A Plus Code such as “9X33+F5 Boston, Massachusetts” can be entered into Google maps, which will put a pin on the spot it represents and give directions to that location. Should the attorney be able to leave case filings with the clerk?

The IRS recently did something like this in substantive argument before the First Circuit Court of Appeals in Boston. One of the judges asked the IRS’s counsel whether an individual’s cryptocurrency transaction information, seized from crypto platform Coinbase, “completely destroys the anonymity that the blockchain provides and in that sense, it’s comparable to Carpenter [v. United States].” Carpenter, of course, is the case where location data the government seized from a cellular communications provider allowed rather comprehensive tracking of that person’s whereabouts. The Supreme Court found in that case that acquiring such data required a warrant.

IRS’s counsel responded (at 15:00) that “if you have the wallet address, if you have the public key, then you can go on the blockchain and find out a lot about somebody.” But, she continued, IRS “did not get the wallet addresses, it did not get public keys. It asked for those, but it didn’t get them.”

What IRS did acquire were transaction hashes, codes that are easily converted to information about transactions by entering them into any block explorer. A block explorer is a web site that returns information about cryptocurrency blocks, transactions, and wallet addresses when one enters their codes. Tying transaction hashes to an individual allows you to track the movement of every Bitcoin that person received and spent from the time it was created to the present day.

Transaction tracing is utterly commonplace. Asked about it in a 2022 Time magazine interview, Wired reporter Andy Greenberg said:

There are whole teams at probably every major law enforcement agency in the U.S. and probably others worldwide, who use this fluently. I know there are full-time crypto tracers inside the FBI, DEA, and IRS.

. . . If you’re a law enforcement agency who doesn’t know how to trace cryptocurrency, you don’t have to learn. You can just pay for a contract with one of [the] companies that will provide you super polished tools to do it and train you how to do it.

If the IRS doesn’t have transaction information, it can’t delve into the spending and thus the relationships of a given person. If they do have transaction information, they can do quite a lot. The IRS said so to the court. But when the IRS’s counsel said it didn’t get wallet addresses or public keys, portraying itself as unable to investigate my transaction history and monitor my future, that was inaccurate. 

My counsel disputed this characterization at the time and invited the IRS’s counsel to correct the record in a post-argument filing, but the IRS declined. And this past week, the court declined to accept a filing pointing out the inaccuracy.

Lawyers have a duty to zealously advocate for their client’s positions. They also have a duty to be candid before the courts. In this case, the IRS’s counsel put herself right up on the candor line and possibly over it. The result, if the First Circuit court remains ignorant of the data IRS has and what can be done with it, could be an ill-gotten victory for the agency and a loss for privacy.