“FOR ALMOST FOUR years, a cottage industry of media conspiracists has devoted itself to accusing Edward Snowden of being a spy for either Russia and/or China at the time he took and then leaked documents from the National Security Agency. There has never been any evidence presented to substantiate this accusation…
…Newly obtained documents conclusively prove that the central tale invented by these Snowden-accusing commentators is a wholesale fabrication. These documents negate the edifice on which this entire fiction has been based from the start…”
“Many #Windows 10 users are unknowingly sending the contents of every keystroke they make to #Microsoft due to an enabled-by-default keylogger. This function has been around since the beginning of #Windows10… If this was ever on while you used Windows 10, there’s no way for you to know that Microsoft has deleted your information…”
Documents provided by NSA whistleblower Edward Snowden reveal Palantir’s role in creating the U.S. government’s international spy machine.
Photo: Kristoffer Tripplaar/Sipa USA/AP
The Intercept can now reveal that Palantir has worked for years to boost the global dragnet of the NSA and its international partners, and was in fact co-created with American spies …
Palantir has never masked its ambitions, in particular the desire to sell its services to the U.S. government — the CIA itself was an early investor in the startup through In-Q-Tel, the agency’s venture capital branch. But Palantir refuses to discuss or even name its government clientele, despite landing “at least $1.2 billion” in federal contracts since 2009, according to an August 2016 report in Politico. The company was last valued at $20 billion and is expected to pursue an IPO in the near future. In a 2012 interview with TechCrunch, while boasting of ties to the intelligence community, Karp said nondisclosure contracts prevent him from speaking about Palantir’s government work.
Photo: Alex Karp, co-founder and CEO of Palantir Technologies
Patrick T. Fallon/Bloomberg/Getty Images
“Palantir” is generally used interchangeably to refer to both Thiel and Karp’s company and the software that company creates. Its two main products are Palantir Gotham and Palantir Metropolis, more geeky winks from a company whose Tolkien namesake is a type of magical sphere used by the evil lord Sauron to surveil, trick, and threaten his enemies across Middle Earth. While Palantir Metropolis is pegged to quantitative analysis for Wall Street banks and hedge funds, Gotham (formerly Palantir Government) is designed for the needs of intelligence, law enforcement, and homeland security customers. Gotham works by importing large reams of “structured” data (like spreadsheets) and “unstructured” data (like images) into one centralized database, where all of the information can be visualized and analyzed in one workspace. For example, a 2010 demo showed how Palantir Government could be used to chart the flow of weapons throughout the Middle East by importing disparate data sources like equipment lot numbers, manufacturer data, and the locations of Hezbollah training camps. Palantir’s chief appeal is that it’s not designed to do any single thing in particular, but is flexible and powerful enough to accommodate the requirements of any organization that needs to process large amounts of both personal and abstract data.
A Palantir promotional video.
Despite all the grandstanding about lucrative, shadowy government contracts, co-founder Karp does not shy away from taking a stand in the debate over government surveillance. In a Forbes profile in 2013, he played privacy lamb, saying, “I didn’t sign up for the government to know when I smoke a joint or have an affair. … We have to find places that we protect away from government so that we can all be the unique and interesting and, in my case, somewhat deviant people we’d like to be.” In that same article, Thiel lays out Palantir’s mission with privacy in mind: to “reduce terrorism while preserving civil liberties.” After the first wave of revelations spurred by the whistleblower Edward Snowden, Palantir was quick to deny that it had any connection to the NSA spy program known as PRISM, which shared an unfortunate code name with one of its own software products. The current iteration of Palantir’s website includes an entire section dedicated to “Privacy & Civil Liberties,” proclaiming the company’s support of both:
Palantir Technologies is a mission-driven company, and a core component of that mission is protecting our fundamental rights to privacy and civil liberties. …
Some argue that society must “balance” freedom and safety, and that in order to better protect ourselves from those who would do us harm, we have to give up some of our liberties. We believe that this is a false choice in many areas. Particularly in the world of data analysis, liberty does not have to be sacrificed to enhance security. Palantir is constantly looking for ways to protect privacy and individual liberty through its technology while enabling the powerful analysis necessary to generate the actionable intelligence that our law enforcement and intelligence agencies need to fulfill their missions.
It’s hard to square this purported commitment to privacy with proof, garnered from documents provided by Edward Snowden, that Palantir has helped expand and accelerate the NSA’s global spy network, which is jointly administered with allied foreign agencies around the world. Notably, the partnership has included building software specifically to facilitate, augment, and accelerate the use of XKEYSCORE, one of the most expansive and potentially intrusive tools in the NSA’s arsenal. According to Snowden documents published by The Guardian in 2013, XKEYSCORE is by the NSA’s own admission its “widest reaching” program, capturing “nearly everything a typical user does on the internet.” A subsequent report by The Intercept showed that XKEYSCORE’s “collected communications not only include emails, chats, and web-browsing traffic, but also pictures, documents, voice calls, webcam photos, web searches, advertising analytics traffic, social media traffic, botnet traffic, logged keystrokes, computer network exploitation targeting, intercepted username and password pairs, file uploads to online services, Skype sessions, and more.” For the NSA and its global partners, XKEYSCORE makes all of this as searchable as a hotel reservation site.
But how do you make so much data comprehensible for human spies? As the additional documents published with this article demonstrate, Palantir sold its services to make one of the most powerful surveillance systems ever devised even more powerful, bringing clarity and slick visuals to an ocean of surveillance data.
PALANTIR’S RELATIONSHIP WITH government spy agencies appears to date back to at least 2008, when representatives from the U.K.’s signals intelligence agency, Government Communications Headquarters, joined their American peers at VisWeek, an annual data visualization and computing conference organized by the Institute of Electrical and Electronics Engineers and the U.S. National Institute of Standards and Technology. Attendees from throughout government and academia gather to network with members of the private sector at the event, where they compete in teams to solve hypothetical data-based puzzles as part of the Visual Analytics Science and Technology (VAST) Challenge. As described in a document saved by GCHQ, Palantir fielded a team in 2008 and tackled one such scenario using its own software. It was a powerful marketing opportunity at a conference filled with potential buyers.
In the demo, Palantir engineers showed how their software could be used to identify Wikipedia users who belonged to a fictional radical religious sect and graph their social relationships. In Palantir’s pitch, its approach to the VAST Challenge involved using software to enable “many analysts working together [to] truly leverage their collective mind.” The fake scenario’s target, a cartoonishly sinister religious sect called “the Paraiso Movement,” was suspected of a terrorist bombing, but the unmentioned and obvious subtext of the experiment was the fact that such techniques could be applied to de-anonymize and track members of any political or ideological group. Among a litany of other conclusions, Palantir determined the group was prone to violence because its “Manifesto’s intellectual influences include ‘Pancho Villa, Che Guevara, Leon Trotsky, [and] Cuban revolutionary Jose Martí,’ a list of military commanders and revolutionaries with a history of violent actions.”
The delegation from GCHQ returned from VisWeek excited and impressed. In a classified report from those who attended, Palantir’s potential for aiding the spy agency was described in breathless terms. “Palantir are a relatively new Silicon Valley startup who are sponsored by the CIA,” the report began. “They claim to have significant involvement with the US intelligence community, although none yet at NSA.” GCHQ noted that Palantir “has been developed closely internally with intelligence community users (unspecified, but likely to be the CIA given the funding).” The report described Palantir’s demo as “so significant” that it warranted its own entry in GCHQ’s classified internal wiki, calling the software “extremely sophisticated and mature. … We were very impressed. You need to see it to believe it.”
The report conceded, however, that “it would take an enormous effort for an in-house developed GCHQ system to get to the same level of sophistication” as Palantir. The GCHQ briefers also expressed hesitation over the price tag, noting that “adoption would have [a] huge monetary … cost,” and over the implications of essentially outsourcing intelligence analysis software to the private sector, thus making the agency “utterly dependent on a commercial product.” Finally, the report added that “it is possible there may be concerns over security — the company have published a lot of information on their website about how their product is used in intelligence analysis, some of which we feel very uncomfortable about.”
A page from Palantir’s “Executive Summary” document, provided to government clients.
However anxious British intelligence was about Palantir’s self-promotion, the worry must not have lasted very long. Within two years, documents show that at least three members of the “Five Eyes” spy alliance between the United States, the U.K., Australia, New Zealand, and Canada were employing Palantir to help gather and process data from around the world. Palantir excels at making connections between enormous, separate databases, pulling big buckets of information (call records, IP addresses, financial transactions, names, conversations, travel records) into one centralized heap and visualizing them coherently, thus solving one of the persistent problems of modern intelligence gathering: data overload.
A GCHQ wiki page titled “Visualisation,” outlining different ways “to provide insight into some set of data,” puts succinctly Palantir’s intelligence value:
Palantir is an information management platform for analysis developed by Palantir Technologies. It integrates structured and unstructured data, provides search and discovery capabilities, knowledge management, and collaborative features. The goal is to offer the infrastructure, or ‘full stack,’ that intelligence organizations require for analysis.
Bullet-pointed features of note included a “Graph View,” “Timelining capabilities,” and “Geo View.”
A GCHQ diagram indicates how Palantir could be used as part of a computer network attack.
Under the Five Eyes arrangement, member countries collect and pool enormous streams of data and metadata collected through tools like XKEYSCORE, amounting to tens of billions of records. The alliance is constantly devising (or attempting) new, experimental methods of prying data out of closed and private sources, including by hacking into computers and networks in non-Five Eyes countries and infecting them with malware.
A 2011 PowerPoint presentation from GCHQ’s Network Defence Intelligence & Security Team (NDIST) — which, as The Intercept has previously reported, “worked to subvert anti-virus and other security software in order to track users and infiltrate networks” — mentioned Palantir as a tool for processing data gathered in the course of its malware-oriented work. Palantir’s software was described as an “analyst workspace [for] pulling together disparate information and displaying it in novel ways,” and was used closely in conjunction with other intelligence software tools, like the NSA’s notorious XKEYSCORE search system. The novel ways of using Palantir for spying seemed open-ended, even imaginative: A 2010 presentation on the joint NSA-GCHQ “Mastering the Internet” surveillance program mentioned the prospect of running Palantir software on “Android handsets” as part of a SIGINT-based “augmented reality” experience. It’s unclear what exactly this means or could even look like.
Above all, these documents depict Palantir’s software as a sort of consolidating agent, allowing Five Eyes analysts to make sense of tremendous amounts of data that might have been otherwise unintelligible or highly time-consuming to digest. In a 2011 presentation to the NSA, classified top secret, an NDIST operative noted the “good collection” of personal data among the Five Eyes alliance but lamented the “poor analytics,” and described the attempt to find new tools for SIGINT analysis, in which it “conducted a review of 14 different systems that might work.” The review considered services from Lockheed Martin and Detica (a subsidiary of BAE Systems) but decided on the up-and-comer from Palo Alto.
Palantir is described as having been funded not only by In-Q-Tel, the CIA’s venture capital branch, but furthermore created “through [an] iterative collaboration between Palantir computer scientists and analysts from various intelligence agencies over the course of nearly three years.” While it’s long been known that Palantir got on its feet with the intelligence community’s money, it has not been previously reported that the intelligence community actually helped build the software. The continuous praise seen in these documents shows that the collaboration paid off. Under the new “Palantir Model,” “data can come from anywhere” and can be “asked whatever the analyst wants.”
Along with Palantir’s ability to pull in “direct XKS Results,” the presentation boasted that the software was already connected to 10 other secret Five Eyes and GCHQ programs and was highly popular among analysts. It even offered testimonials (TWO FACE appears to be a code name for the implementation of Palantir):
[Palantir] is the best tool I have ever worked with. It’s intuitive, i.e. idiot-proof, and can do a lot you never even dreamt of doing.
This morning, using TWO FACE rather than XKS to review the activity of the last 3 days. It reduced the initial analysis time by at least 50%.
Enthusiasm runs throughout the PowerPoint: A slide titled “Unexpected Benefits” reads like a marketing brochure, exclaiming that Palantir “interacts with anything!” including Google Earth, and “You can even use it on a iphone or laptop.” The next slide, on “Potential Downsides,” is really more praise in disguise: Palantir “Looks expensive” but “isn’t as expensive as expected.” The answer to “What can’t it do?” is revealing: “However we ask, Palantir answer,” indicating that the collaboration between spies and startup didn’t end with Palantir’s CIA-funded origins, but that the company was willing to create new features for the intelligence community by request.
On GCHQ’s internal wiki page for TWO FACE, analysts were offered a “how to” guide for incorporating Palantir into their daily routine, covering introductory topics like “How do I … Get Data from XKS in Palantir,” “How do I … Run a bulk search,” and “How do I … Run bulk operations over my objects in Palantir.”For anyone in need of a hand, “training is currently offered as 1-2-1 desk based training with a Palantir trainer. This gives you the opportunity to quickly apply Palantir to your current work task.” Palantir often sends “forward deployed engineers,” or FDEs, to work alongside clients at their offices and provide assistance and engineering services, though the typical client does not have access to the world’s largest troves of personal information. For analysts interested in tinkering with Palantir, there was even a dedicated instant message chat room open to anyone for “informally” discussing the software.
The GCHQ wiki includes links to classified webpages describing Palantir’s use by the Australian Defence Signals Directorate (now called the Australian Signals Directorate) and to a Palantir entry on the NSA’s internal “Intellipedia,” though The Intercept does not have access to copies of the linked sites. However, embedded within Intellipedia HTML files available to The Intercept are references to a variety of NSA-Palantir programs, including “Palantir Classification Helper,” “[Target Knowledge Base] to Palantir PXML,” and “PalantirAuthService.” (Internal Palantir documents obtainedby TechCrunch in 2013 provide additional confirmation of the NSA’s relationship with the company.)
One Palantir program used by GCHQ, a software plug-in named “Kite,” was preserved almost in its entirety among documents provided to The Intercept. An analysis of Kite’s source code shows just how much flexibility the company afforded Five Eyes spies. Developers and analysts could ingest data locally using either Palantir’s “Workspace” application or Kite. When they were satisfied the process was working properly, they could push it into a Palantir data repository where other Workspace users could also access it, almost akin to a Google Spreadsheets collaboration. When analysts were at their Palantir workstation, they could perform simple imports of static data, but when they wanted to perform more complicated tasks like import databases or set up recurring automatic imports, they turned to Kite.
Kite worked by importing intelligence data and converting it into an XML file that could be loaded into a Palantir data repository. Out of the box, Kite was able to handle a variety of types of data (including dates, images, geolocations, etc.), but GCHQ was free to extend it by writing custom fields for complicated types of data the agency might need to analyze. The import tools were designed to handle a variety of use cases, including static data sets, databases that were updated frequently, and data stores controlled by third parties to which GCHQ was able to gain access.
This collaborative environment also produced a piece of software called “XKEYSCORE Helper,” a tool programmed with Palantir (and thoroughly stamped with its logo) that allowed analysts to essentially import data from the NSA’s pipeline, investigate and visualize it through Palantir, and then presumably pass it to fellow analysts or Five Eyes intelligence partners. One of XKEYSCORE’s only apparent failings is that it’s so incredibly powerful, so effective at vacuuming personal metadata from the entire internet, that the volume of information it extracts can be overwhelming. Imagine trying to search your Gmail account, only the results are pulled from every Gmail inbox in the world.
MAKING XKEYSCORE MORE intelligible — and thus much more effective — appears to have been one of Palantir’s chief successes. The helper tool, documented in a GCHQ PDF guide, provided a means of transferring data captured by the NSA’s XKEYSCORE directly into Palantir, where presumably it would be far easier to analyze for, say, specific people and places. An analyst using XKEYSCORE could pull every IP address in Moscow and Tehran that visited a given website or made a Skype call at 14:15 Eastern Time, for example, and then import the resulting data setinto Palantir in order to identify additional connections between the addresses or plot their positions using Google Earth.
Palantir was also used as part of a GCHQ project code-named LOVELY HORSE, which sought to improve the agency’s ability to collect so-called open source intelligence — data available on the public internet, like tweets, blog posts, and news articles. Given the “unstructured” nature of this kind of data, Palantir was cited as “an enrichment to existing [LOVELY HORSE] investigations … the content should then be viewable in a human readable format within Palantir.”
Palantir’s impressive data-mining abilities are well-documented, but so too is the potential for misuse. Palantir software is designed to make it easy to sift through piles of information that would be completely inscrutable to a human alone, but the human driving the computer is still responsible for making judgments, good or bad.
A 2011 document by GCHQ’s SIGINT Development Steering Group, a staff committee dedicated to implementing new spy methods, listed some of these worries. In a table listing “risks & challenges,” the SDSG expressed a “concern that [Palantir] gives the analyst greater potential for going down too many analytical paths which could distract from the intelligence requirement.” What it could mean for analysts to distract themselves by going down extraneous “paths” while browsing the world’s most advanced spy machine is left unsaid. But Palantir’s data-mining abilities were such that the SDSG wondered if its spies should be blocked from having full access right off the bat and suggested configuring Palantir software so that parts would “unlock … based on analysts skill level, hiding buttons and features until needed and capable of utilising.” If Palantir succeeded in fixing the intelligence problem of being overwhelmed with data, it may have created a problem of over-analysis — the company’s software offers such a multitude of ways to visualize and explore massive data sets that analysts could get lost in the funhouse of infographics, rather than simply being overwhelmed by the scale of their task.
If Palantir’s potential for misuse occurred to the company’s spy clients, surely it must have occurred to Palantir itself, especially given the company’s aforementioned “commitment” to privacy and civil liberties. Sure enough, in 2012 the company announced the formation of the Palantir Council of Advisors on Privacy and Civil Liberties, a committee of academics and consultants with expertise in those fields. Palantir claimed that convening the PCAP had “provided us with invaluable guidance as we try to responsibly navigate the often ill-defined legal, political, technological, and ethical frameworks that sometimes govern the various activities of our customers,” and continued to discuss the privacy and civil liberties “implications of product developments and to suggest potential ways to mitigate any negative effects.” Still, Palantir made clear that the “PCAP is advisory only — any decisions that we make after consulting with the PCAP are entirely our own.”
What would a privacy-minded conversation about privacy-breaching software look like? How had a privacy and civil liberties council navigated the fact that Palantir’s clientele had directly engaged in one of the greatest privacy and civil liberties breaches of all time? It’s hard to find an answer.
Palantir wrote thatit structured the nondisclosure agreement signed by PCAP members so that they “will be free to discuss anything that they learn in working with us unless we clearly designate information as proprietary or otherwise confidential (something that we have rarely found necessary except on very limited occasions).” But despite this assurance of transparency, all but one of the PCAP’s former and current members either did not return a request for comment for this article or declined to comment citing the NDA.
The former PCAP member who did respond, Stanford privacy scholar Omer Tene, told The Intercept that he was unaware of “any specific relationship, agreement, or project that you’re referring to,” and said he was not permitted to answer whether Palantir’s work with the intelligence community was ever a source of tension with the PCAP. He declined to comment on either the NSA or GCHQ specifically. “In general,” Tene said, “the role of the PCAP was to hear about client engagement or new products and offerings that the company was about to launch, and to opine as to the way they should be set up or delivered in order to minimize privacy and civil liberties concerns.” But without any further detail, it’s unclear whether the PCAP was ever briefed on the company’s work for spy agencies, or whether such work was a matter of debate.
There’s little detail to be found on archived versions of Palantir’s privacy and civil liberties-focused blog, which appears to have been deleted sometime after the PCAP was formed. Palantir spokesperson Matt Long told The Intercept to contact the Palantir media team for questions regarding the vanished blog at the same email address used to reach Long in the first place. Palantir did not respond to additional repeated requests for comment and clarification.
A GCHQ spokesperson provided a boilerplate statement reiterating the agency’s “longstanding policy” against commenting on intelligence matters and asserted that all its activities are “carried out in accordance with a strict legal and policy framework.” The NSA did not provide a response.
Anyone worried that the most powerful spy agencies on Earth might use Palantir software to violate the privacy or civil rights of the vast number of people under constant surveillance may derive some cold comfort in a portion of the user agreement language Palantir provided for the Kite plug-in, which stipulates that the user will not violate “any applicable law” or the privacy or the rights “of any third party.” The world will just have to hope Palantir’s most powerful customers follow the rules.
George Soros Finances Group Helping Facebook Flag ‘Disputed’ Stories
The organization partnered with Facebook to help determine whether a certain story is “disputed” is financed by billionaire George Soros and a slew of other left-wing funders.
The “International Fact-Checking Network (IFCN)” drafted a code of five principles for news websites to accept, and Facebook yesterday announced it will work with “third-party fact checking organizations” that are signatories to the code of principles.
Facebook says that if the “fact checking organizations” determine that a certain story is fake, it will get flagged as disputed and, according to the Facebook announcement, “there will be a link to the corresponding article explaining why. Stories that have been disputed may also appear lower in News Feed.”
IFCN is hosted by the Poynter Institute for Media Studies. A cursory search of the Poynter Institute website finds that Poynter’s IFCN is openly funded by Soros’ Open Society Foundations as well as the Bill & Melinda Gates Foundation, Google, and the National Endowment for Democracy.
Poynter’s IFCN is also funded by the Omidyar Network, which is the nonprofit for liberal billionaire eBay founder Pierre Omidyar. The Omidyar Network has partnered with the Open Society on numerous projects and it has given grants to third parties using the Soros-funded Tides Foundation. Tides is one of the largest donors to left-wing causes in the U.S.
Another significant Poynter Institute donor is the Craig Newmark Foundation, the charitable organization established by Craigslist Founder Craig Newmark. On Monday, just days before the announcement of the Facebook partnership, Poynter issued a press release revealing that Newmark donated $1 million to the group to fund a faculty chair in journalism ethics.
States the press release:
The gift will support a five-year program at Poynter that focuses on verification, fact-checking and accountability in journalism. It’s the largest donation Poynter’s ever received from an individual foundation.
The Newmark Chair will expand on Poynter’s teaching in journalism ethics and develop certification programs for journalists that commit to ethical decision-making practices. The faculty member will also organize an annual conference on ethics issues at Poynter and be a regular contributor to Poynter.org.
Newmark funds scores of liberal groups also financed by Soros, including the Sierra Club, the New America Foundation, and the Sunlight Foundation.
Newmark also finances the investigative journalism group called the Center for Public Integrity, where he serves on the board. Soros’ Open Society is another Public Integrity donor.
Soros has earned his megafortune in part by short selling currencies and causing economic crises. He is credited with breaking the pound on September 16, 1992 in a day that became known in Britain as “Black Wednesday.” He reportedly made $1.2 billion from that crisis. In 2002, he was convicted for insider trading.
Poynter, meanwhile, has hosted controversial journalism programs in the past, including one that was accused of downplaying the threat of global Islamic terrorism. FoxNews.com reported the course suggested reporters “keep the death toll from Islamic terrorism in ‘context’ by comparing that toll to the number of people killed every year by malaria, HIV/AIDS and other factors.”
The course taught reporters that the term “jihad” means internal struggle, and it discussed what it claimed was the issue of “right-wing activists” attempting to link American Muslims to terrorism.
The section includes the good-journalism tip that reporters should check to see if experts they’re interviewing “have a bias or a stake in the story you are covering.” But then it only cites examples of anti-Muslim groups.
The course in Islam, Fox News reported, was supported by a group calling itself the Social Science Research Council, which has received funding from Soros-financed groups.
In response to the report, the Poynter Institute explained that it created the course “as a tool for journalists who want to be accurate in educating their audience about the religion and culture of Islam, Muslim communities in the U.S., and the distinctions between Islam as a political movement and the radical philosophies that inspire militant Islamists.”
“We believe there is a need to better understand the complexities of Muslim societies and the online course offered by Poynter and Washington State University is a vital resource toward that end,” Poynter added.
“The values underpinning the course are truth, accuracy, independence, fairness, minimizing harm and context — the core journalistic values on which we build all our teaching here at Poynter.”
We fact-check claims using the same standard for every fact check. We do not concentrate our fact-checking on any one side. We follow the same process for every fact check and let the evidence dictate our conclusions. We do not advocate or take policy positions on the issues we fact-check.
2. A COMMITMENT TO TRANSPARENCY OF SOURCES
We want our readers to be able to verify our findings themselves. We provide all sources in enough detail that readers can replicate our work, except in cases where a source’s personal security could be compromised. In such cases, we provide as much detail as possible.
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We are transparent about our funding sources. If we accept funding from other organizations, we ensure that funders have no influence over the conclusions we reach in our reports. We detail the professional background of all key figures in our organization and explain our organizational structure and legal status. We clearly indicate a way for readers to communicate with us.
4. A COMMITMENT TO TRANSPARENCY OF METHODOLOGY
We explain the methodology we use to select, research, write, edit, publish and correct our fact checks. We encourage readers to send us claims to fact-check and are transparent on why and how we fact-check.
5. A COMMITMENT TO OPEN AND HONEST CORRECTIONS
We publish our corrections policy and follow it scrupulously. We correct clearly and transparently in line with our corrections policy, seeking so far as possible to ensure that readers see the corrected version.
That was the ruling today out of a federal court in the Northern District of California authorizing the Internal Revenue Service (IRS) to serve a “John Doe” summons on Coinbase requesting the identities of United States Coinbase customers who transferred convertible virtual currency from 2013 to 2015. Coinbase, which is headquartered in San Francisco, California, is a company which facilitates transactions of digital currencies like Bitcoin and Ethereum.
The Department of Justice (DOJ) had made the request earlier this month (California Northern District Court, Case No. 3:16-cv-06658-JSC) on behalf of the IRS since a “John Doe” summons can only be served by the IRS with federal court approval. A “John Doe” summons is an order that does not specifically identify the person but rather identifies a person or ascertainable group or class by their activities. In the past, that’s included investors in a particular tax shelter or account holders at a defined financial institution: the IRS has made use of the procedure, for example, when seeking information about offshore accounts those related to the UBS investigation.
In granting the motion, Judge Jacqueline Scott Corley found that “[b]ased upon a review of the Petition and supporting documents, the Court has determined that the “John Doe” summons to Coinbase, Inc. relates to the investigation of an ascertainable group or class of persons, that there is a reasonable basis for believing that such group or class of persons has failed or may have failed to comply with any provision of any internal revenue laws, and that the information sought to be obtained from the examination of the records or testimony (and the identities of the persons with respect to whose liability the summons is issued) are not readily available from other sources.”
Principal Deputy Assistant Attorney General Caroline D. Ciraolo, head of the Justice Department’s Tax Division, said about the ruling, “As the use of virtual currencies has grown exponentially, some have raised questions about tax compliance. Tools like the John Doe summons authorized today send the clear message to U.S. taxpayers that whatever form of currency they use – bitcoin or traditional dollars and cents – we will work to ensure that they are fully reporting their income and paying their fair share of taxes.”
IRS Commissioner John Koskinen echoed that sentiment, saying, “Transactions in virtual currency are taxable just like those in any other property. The John Doe summons is a step designed to help the IRS ensure people doing business in the emerging economy are following the tax laws and meeting their responsibilities.”
The initial request was triggered, according to court documents, after the IRS found instances of tax evasion involving Coinbase customers. To clarify, it has not been alleged by authorities that Coinbase had any knowledge that any of its users might be involved in tax evasion.
Unlike other kinds of financial transactions, there is currently no third-party information which requires separate reporting for bitcoin (think of third-party reporting like the forms 1099 issued by your bank). This, says IRS, means that the “likelihood of underreporting is significant” which is why they are seeking information from Coinbase. Coinbase claims to be “the world’s most popular way to buy and sell bitcoin and ethereum” (Coinbase did not start accepting Ethereal, or ethers, until 2016, so it was not included in the summons).
The IRS is specifically seeking records for Coinbase users who transferred convertible virtual currency at any time between December 31, 2013, and December 31, 2015, with “any U.S. address, U.S. telephone number, U.S. e-mail domain, or U.S. bank account.” Requested records include but are not limited to user profiles, user preferences, user security settings and history, user payment methods, and other information related to the funding sources for the account/wallet/vault. And that’s just for starters. IRS is also seeking all records of account/wallet/vault activity including but not limited to records identifying the date, amount, and type of transaction, names or other identifiers of parties to the transaction; requests or instructions to send or receive bitcoin; and all related correspondences.
The request raised concerns in the tax and virtual currency communities about the scope of the information sought by authorities. Those concerns remain, and it wouldn’t be a surprise to see mounting opposition to the government’s request.
For its part, Coinbase issued a statement in response to the ruling, saying:
We are aware of, and expected, the Court’s ex parte order today. We look forward to opposing the DOJ’s request in court after Coinbase is served with a subpoena. As we previously stated, we remain concerned with our U.S. customers’ legitimate privacy rights in the face of the government’s sweeping request.
‘People trust the “unbiased” internet search giant Google so much it can actually influence up to 10 million undecided voters to choose Hillary Clinton for president, prominent US psychologist and author Robert Epstein told RT following years of research.’
‘Despite being a supporter of the Democratic presidential nominee, Dr. Epstein believes Google’s unchecked algorithm of placing one candidate over the other in search results constitutes a “threat to democracy”.’
“Tesla’s new line of energy-harvesting roof tiles are a key part of Elon Musk’s plan to make solar sexy.”
“[Musk] unveiled a range of textured glass tiles with integrated solar cells that are nearly indistinguishable from conventional tiling, along with a sleek update to the company’s energy-storing Powerwall.”
“Several human rights organizations will soon launch a campaign urging President Obama to pardon NSA whistleblower Edward Snowden, coinciding with the premiere of the Oliver Stone biopic based on his life…”
“Avant Garde Innovations, the startup founded by siblings Arun and Anoop George from Kerala, has come up with a low-cost wind turbine that can generate enough electricity to power an entire house for a lifetime. The size of a ceiling fan, this wind turbine can generate 5 kWh/kW per day — with just a one-time cost of US$750.”
‘If you made a Google search for “presidential candidates” … you would have found an unusual result … the top bar of results displayed Hillary Clinton, Bernie Sanders, and Green Party candidate Jill Stein — with Donald Trump and Libertarian candidate Gary Johnson left off the top bar entirely.’