Category: UNCATEGORIZED

Fred traded bitcoin, ether and a handful of other cryptocurrencies on Gemini, Binance and Coinbase last year. Unfortunately, due to the crypto downturn, his trading yielded a capital loss of more than $35,000. He’s not alone — the stories have been coming out right and left about people who are not already rich, who have lost serious money lately.

While it was a rough loss, filing taxes could add another headache in a few weeks if not done correctly.

Given that bitcoin is down 55 percent year-over-year in 2018, compared to 686 percent up the year before, chances are that filing taxes on crypto trades may look quite different this year for crypto holders like Fred.

The main difference is that users will want to claim capital losses in a bear year to reduce their tax bill. That means ensuring that you are maximizing your capital loss claims to the greatest potential by:

• Offsetting capital gains in other asset classes in the same tax year
• Using the remainder of losses to offset up to $3,000 of other income ($1,500 if you’re married and filing separately)
• Rolling over any remaining capital losses to future years

Capital loss example

To get an understanding of how powerful this is, let’s take an example. Imagine Maya earned $5,000 in the stock market in 2018, but lost $9,000 in cryptocurrency trading in the same year. Without filing cryptocurrency taxes, Maya would be on the hook for capital gains taxes on $5,000 from the stock market. At the 24 percent short-term tax rate, that would be $1,200 ($5,000 * 24 percent) to pay in taxes!

Now, taking into account the $9,000 crypto capital loss, all $5,000 of capital gains in the stock market would be offset, leaving an additional $4,000 of losses. Because Maya is single, an additional $3,000 of income could be offset (which normally would also be taxed at 24 percent). Therefore, you would save $1,200 of taxes (from the stock market) and $720 ($3,000 * 24 percent) that would have been paid in income tax, for a total of $1,920 saved in taxes. And, on top of that, Maya would still have an incremental $1,000 ($9,000 – $5,000 – $3,000) of capital losses that could be rolled forward to the 2019 tax year to offset capital gains (and potentially income) the next year as well. Not bad.

2018 tax changes

The last year brought many new cryptocurrency trading pairs versus earlier years, as well as more transactions on more exchanges. This means, more than ever, you’ll want to ensure that you have all your accounts or records from all the accounts handy.

There are also regulatory differences as well. This year for U.S. holders, the IRS has clarified that like-kind exchanges only apply to real property (like real estate). That means that cryptocurrency-to-cryptocurrency trades in 2018 are subject to capital gains calculations, not just when you cash out to fiat currency (e.g. USD) at the end of the day.

According to IRS guidance, all virtual currencies are taxed as property, whether you hold bitcoin, ether or any other cryptocurrency. With the new clarification that like-kind exchange does not apply to cryptocurrency, this means you need to have solid records of every cryptocurrency transaction you made, including crypto-to-crypto transactions.

Keeping track of all of these individual transactions can turn into a nightmare scenario depending on your trade history; however, it is important to have a record of all your transactions so you can file your IRS Form 8949, the capital gains tax form. New tools are also starting to be built to help automate the tracking, record-keeping and tax form generation for your cryptocurrency taxes.

My company, CoinTracker, is one — and Fred is a real client. He’s preparing his taxes now: he will be able to wipe all his capital gains clear for 2018, offset $3,000 of income, and also rollover all the rest of the capital gains to future years. While he doesn’t know the full amount in savings yet because he hasn’t finished his taxes, it will likely end up being thousands of dollars.

Mining

In the event that you are a cryptocurrency miner, the IRS counts mined cryptocurrency as taxable income. The mined coins are included in gross income and taxed based on the fair market value of the coins at the time they are received. The filing method will depend on whether you are a hobbyist or business miner, which depends on factors such as the manner of the mining, the expertise of the taxpayer and the amount of profits.

Hobbyists will add the income to their Form 1040 and not be subject to self-employment taxes, though not have as many deductions available. Business miners will include their income and expenses on Schedule C and their income will be subject to 15.3 percent self-employment tax (though will be able to claim deductions against income).

Disclaimer: This post is for informational purposes only. For tax advice, please consult a tax professional.

Instant print cameras have been popular for a long, long time, but they’re seeing a renaissance now — led by Fujifilm, whose Instax mini-films and cameras lead the pack. But Canon wants in, and has debuted a pair of new cameras to challenge Fuji’s dominance — but their reliance on digital printing may hold them back.

The cameras have confusing, nonsensical names in both the U.S. and Europe: Here, they’re the IVY CLIQ and CLIQ+, while across the pond it’s the Zoemini C and S. Really now, Canon! But the devices themselves are extremely simple, especially if you ignore the cheaper one, which you absolutely should do.

The compact CLIQ+ has a whole 8 megapixels on its tiny sensor, but that’s more than enough to send to the 2×3″ Zink printer built into the camera. The printer can store up to ten sheets of paper at once, and spits them out in seconds if you’re in a hurry, or whenever you feel like it if you want to tweak them, add borders, crop or do duplicates, and so on. That’s all done in a companion app.

And herein lies the problem: Zink prints just aren’t that good. They cost less than half of what Instax Mini do per shot (think a quarter or so if you buy a lot) — but the difference in quality is visible. They’ve gotten better since the early days when they were truly bad, but the resolution and color reproduction just isn’t up to instant film standards. Instax may not be perfect, but a good shot will get very nice color and very natural-looking (if not tack-sharp) details.

The trend towards instant printing is also at least partly a trend towards the purely mechanical and analog. People tired of taking a dozen shots on their phone and then never looking at them again are excited by the idea that you can leave your phone in your bag and get a fun photographic keepsake, no apps or wireless connections necessary.

A digital camera with a digital printer that connects wirelessly to an app on your smartphone may not be capable of capitalizing on this trend. But then again, they could be a great cheap option for the younger digital-native set and kids who don’t care about image quality, have no affinity for analog tech, and just want to print stickers for their friends or add memes to their shots.

Oh, we do have fun, don’t we, fellow kids?

The $160 CLIQ+, or Zoemini S, has a ring flash as well as the higher megapixel count of the two (8 vs 5), and the lower-end $100 model doesn’t support the app, either. Given the limitations of the sensor and printer, you’re going to want as much flash as you can get. That’s too bad, because the cheap one comes in a dandy yellow color that is by far the most appealing to me.

The cameras should be available in a month or two at your local retailer or online shop.

As promised back in January by Twitter CEO Jack Dorsey, the company today is rolling out an even darker version of the app’s existing dark mode. Before, Twitter’s dark theme was more of a blue-ish shade instead of a true black, which not everyone seemed to like. Now, there’s an optional setting that makes the current dark mode more of a pitch black.

To use the new feature, you’ll first visit the Twitter app’s “Settings and Privacy” section, then click on “Display and Sound.” From there, you can toggle on the “Dark mode” which enables the current blue-black theme.

A second option, “Lights out” is offered below. If checked, dark mode ditches the blue tones and becomes black instead.

It’s an interesting choice to not just darken the existing theme, but rather introduce a third option. Most apps offering a dark mode don’t do this – they just offer a bright, white theme and another darker one. Twitter – which doesn’t always do things by the book to say the least – has gone a different route.

A tweak to the dark mode may seem like a minor adjustment to be concerned with, but dark modes today have grown in popularity as larger phone screens became the norm – particularly because they can help to conserve battery life on high-end OLED devices. (And especially on apps used as regularly as Twitter!)

Some people also feel a dark mode is just easier on the eyes when apps are used for long stretches of time.

The topic of dark modes even made its way to The Wall Street Journal which made a case for darker themes becoming standard not only for the battery benefits, but also because they may help lessen device addiction and improve sleep.

Today, a number of apps support dark themes including YouTube, Google, Medium, Reddit, Instapaper, Pocket, iBooks, Kindle, Google Maps and Waze, and others. WhatsApp is also reportedly working on a dark mode, according to recent reports.

Dorsey first announced Twitter’s plans for a new dark mode a few months ago, in response to a customer complaint which called Twitter’s dark mode a “weird blue.”

Twitter says the new Lights Out mode is rolling out today.

Building a startup is incredibly tough. There are the constant ups and downs, the moments of sheer ambiguity and terror. And so, few moments in a startup’s life are as triumphant — and crystal clear — as closing a round of funding. Yes, yes, raising venture capital shouldn’t be celebrated as a milestone, and the focus should always be on product and users … but it just feels so damn good sometimes just to feel that sense of euphoria: I built something, and now others are giving me potentially millions of dollars to shoot for the stars.

Unfortunately, that clarity is increasingly vanishing. First, “closing a round” is rarely as sharp a distinction as it used to be. Seed rounds (and even later-stage rounds) are often raised over extended periods of time, with many partial closings conducted as new angels and seed funds come to the (cap) table.

Then there is also the growing disconnect between raising capital and the actual announcement of that fundraise. Founders are trying to remain under stealth for longer periods of time to hide from competitors, and they want to message their news in a careful manner.

All of which means that the Form D filed with the Securities and Exchange Commission when closing an exempt fundraise (aka venture rounds) is no longer as simple a process as it once was.

Lawyers will state publicly that startups should always file their legally mandatory paperwork (that’s probably also a good rule for life). The reality, though, is pretty much the opposite when you talk to startup attorneys in private.

Here’s the secret about Form D filings today: the norms in Silicon Valley have changed, and Form D filings are often filed late, not at all, and many startups are advised to lie low in the hopes of avoiding stricter SEC scrutiny. What was once a fait accompli is now a deliberative process, with important decision points for founders.

Extra Crunch contacted about two dozen startup attorneys, from the biggest firms in the industry to the one-person shops with a shingle out front. Getting straight answers here has been tough, if only because no lawyer really wants to say out loud that they actively recommend their clients violate government regulations (there is that whole law license thing, which apparently lawyers care about).

Practically all of these conversations were done off-the-record and not for attribution, since as one lawyer said, “the last thing I need is the damn SEC sending our firm a nastygram.” Other firms wholly swore us off from even discussing their Form D cultures.

Full disclosure: I am not an attorney, and while I had attorneys read over this draft, this does not constitute legal advice, particularly specific legal advice for your specific startup and situation. Get inspiration from this analysis, but always (really, truly, always) consult qualified legal counsel to answer legal questions about your startup.

With that said, here is our guide to the new world of venture capital securities filings.

Drake’s latest collaboration isn’t with Kanye or Kendrick, it’s with Marissa Mayer.

The rap superstar has joined a bevy of Silicon Valley investors including Strauss Zelnick, Comcast, Macro Ventures, Canaan, RRE, Courtside and Marissa Mayer to fund Players’ Lounge, an eSports startup looking to pit gamers against each other in their favorite titles with some friendly wagers on the line.

The startup has just announced that it closed $3 million in funding.

The company which has been around for five years ago got its start as an eSports startup looking to organize real-life matches at bars in New York City to play FIFA. That’s obviously not the most scalable business of all time, but last year after joining Y Combinator, the company really dove into a new model which looked to create an online hub for gamers to battle against each other in titles of their choosing with money on the line.

The company has a heavy emphasis on sports titles like FIFA 19, NBA 2K19 and Madden 19, but there are also some heavy hitters like Fortnite, Apex Legends and Super Smash Bros Ultimate.

Gamers can set a match or join one in head-to-head challenges or in massive 500+ person tournaments. The wagers are often a buck or two but can swell much higher. Players’ Lounge takes 10 percent of the bets as a fee. Because it’s a game of skill, not chance, there aren’t many issues with gambling regulation though a few states still don’t allow the service, the company says.

The startup plans to use their new cash to beef up their library of playable games and add to their development team.

[Editor’s note: This article is a part of our latest initiative to demystify design and find the best brand designers and agencies in the world who work with early-stage companies — nominate a talented brand designer you’ve worked with.]

A brand is far more than logos and colors. A consistent brand identity not only communicates your company’s purpose and values to customers, but it also shapes your product development cycle and corporate culture. A branding project can help you figure out what and how to communicate your company’s story, but how much does it cost?

I’ve been a designer for over a decade (and a marketer before that), working with organizations ranging from tiny startups to the Fortune 500; this piece will give you a general idea of branding costs, with the knowledge that these broad numbers may not be applicable in every single case (in fact, you’re likely to find exceptions).

Bootstrappers and pre-seed startups

For most startups at this stage, your goal is to establish a proof of concept that can show product/market fit and bring investor dollars. You may only need a logo, website, and basic brand positioning. Isla Murray, Creative Director and Cofounder at Lama Six, also recommends investing your money in designing a beautiful deck: “It will set you apart and allow your message to shine through.”

Brand strategy and positioning

Positioning involves understanding who you are as a company, how your product fits the marketplace, and how you communicate your company’s values. This is the most important piece of the branding puzzle and one that’s worthwhile to begin on your own – when you have more funding, your original strategy work will give you a base for conveying your identity to professionals who can take it further. Two suggestions that designers commonly recommend are Positioning: The Battle for Your Mind by Al Ries and Jack Trout and Designing Brand Identity by Alina Wheeler, a primer on brand design.

Approximate cost: Your time.

Logo and visual identity

A brand is a relationship with your audience, and you’ll want to make sure that every interaction with them communicates your message. You’ll almost certainly need to hire a designer for this work. Sites like Fiverr and 99designs offer cheap logos, but independent consultants like Pablo Defendini advise that if you can find a small budget, you’ll get far better results by hiring an experienced professional to create a more polished logo and simple usage guide.

Approximate cost: $100-$3000.

Website

As a UX designer and front-end developer, I often recommend that young companies not spend their limited dollars on building a website from scratch – pre-built, templated websites like Squarespace can get you up and running for minimal cost, and you can buy domain names from a registrar like Namecheap. Customizations will be minimal, but you can’t beat the price.

Approximate cost: $10-30/month, plus $20/year per domain.

Early-stage, funded startups

Once you’re paying for experienced help, finding a good fit with a designer is crucial: Trust is the most important factor in a designer-client relationship, and design is ultimately a collaborative process. So take the time to find a contractor or firm that you respect and feel comfortable with.

Another option: If you already have a strong designer in-house, you might consider setting aside time for them to focus on your brand identity — they’ll cost less, and they already have intimate knowledge of your company values and audience.

Pricing comes in a wide range depending on your needs: Defindini says he’s worked on identity projects ranging from $5000 for a standalone logo to $200,000 for a complex identity system with multiple brands. Costs are also driven by scope and time. When you receive proposals from firms, be clear about your needs and transparent about what you can afford. Murray says that if clients don’t have a full budget, she’ll look for ways to scope down projects, which might involve reducing deliverables or going through fewer rounds of feedback and iteration.

Many designers will charge project rates, but if you’re paying by the hour, expect to spend $100-$150/hour for an experienced consultant and $150-$600/hour for a firm depending on their size and location.

Brand strategy and positioning

Brand strategy and positioning should drive most of your business decisions, so it’s worth taking the time to do this right. With a smaller budget, a consultant might spend a few days with your company leadership figuring out your core values and how to articulate them. For a larger budget, expect design teams to do more research and a competitive analysis, resulting in deliverables like a communication strategy and voice/tone guidelines for your marketing team.

More expensive projects may also include things like trainings to make sure your staff correctly and consistently implements your brand. In general, pricing is determined by how many people are working on your branding project and the complexity of your deliverables.

Approximate cost: $5000-$20,000 (freelancers and small firms), $30,000-$80,000 (large firms).

Logo and visual identity

Visual identity is the result of independent research, visual moodboarding, and rounds of feedback and iteration, says Murray. At the end of the process, you’ll typically receive a logo, typeface, color and design elements, and visual brand attributes. Larger-budget projects will typically involve detailed guidance on specific illustration and photography styles, iconography, and more – Murray suggests also including social media visual strategy and Instagram post templates.

Pricing here increases the more logo variations you need, the more brands you have, and the level of detail required in your visual guidance. Rounds of feedback and iteration add cost, as does the size of the team you hire.

Approximate cost: $5000-$15,000 (freelancers and small firms), $15,000-$75,000 (large firms).

Website

This is the branding piece with the greatest variability in cost, with projects getting more expensive as they require more user research, prototyping, content creation, and engineering work. Pricing is largely dependent on the complexity of engineering requirements and the number of iterations you want to go through.

Generally, you have static marketing sites on the lower end, websites built on lightweight content management systems (i.e. a custom visual design built to run on WordPress) in the middle, and web applications managing heavy databases or a more robust CMS like Sitecore or Drupal on the higher end.

Approximate cost: $2000-$20,000 (freelancers and small firms), $30,000-$200,000 (large firms).

Company name development – for more mature startups

Many startups find themselves at a stage where they’re well-funded but have a name that no longer fits – what feels right when your company is a month old and bootstrapped with your savings account may not feel the same two years later. A naming agency will develop names that work with your brand positioning, do a competitive analysis to research the tone, strength, and messaging of these names, and pre-screen them for trademark availability. (Note that you’ll typically need to hire a legal team to register the trademark once this is done.)

Approximate cost: $15,000-$75,000 (naming firm).

There’s no one-size-fits-all solution

You may hire one of the top branding agencies in the world or you may have a family member who’s an experienced designer and willing to give you an incredible deal. But no matter who you choose to work with, branding is a vital part of your business that will help you both understand and communicate who you are.

MoviePass may still be trying to figure out how to make a movie ticket subscription service financially viable, but it can be credited for at least correctly identifying consumer demand for such a thing. There’s now a market for movie tickets by subscription from it as well as rivals like Sinemia, AMC Stubs A-List, Cinemark Movie Club, and — as of yesterday — newcomer Infinity. Now you can add one more: Atom Tickets, which is today announcing a platform that will allow theaters to build their own movie ticket subscription services.

The idea here is that the exhibitors themselves — not startups — should be involved in establishing the business model that’s right for them. Atom Tickets will instead provide the underlying technology and support that makes such a thing possible.

The new platform, called Atom Movie Access, will be offered to exhibitors across North America. It provides a fully digitally booking platform for subscribers through the Atom Tickets app. That means subscribers can also take advantage of Atom Tickets’ other benefits — like reserving seats in advance, inviting friends through their contacts, pre-ordering concessions for quick pickup where available and checking in using a phone instead of paper tickets.

On the back end, Atom Tickets will also handle the payment processing, customer service, fraud detection and anti-abuse measures. The latter is particularly important for movie ticket subscriptions, as MoviePass noted that as much as 20 percent of its customers were abusing the service, which significantly contributed to its financial issues.

In addition, the platform will allow subscribers to be able to make complex transactions in-app, like redeeming a free movie while also buying full-priced tickets for a guest in one sale. It also supports things like being able to choose between an included free screening or saving it for later, the company says, and allows for the creation of differently tiered plans. For example, there can be plans for both individuals or groups and tiers for standard and premium movie formats.

“Atom Tickets is an innovative ticketing platform that enables exhibitors to reach and engage new and incremental audiences,” said Matthew Bakal, chairman and co-founder of Atom Tickets, in a statement about the launch. “We’ve always believed in being a valuable partner to exhibitors, starting with the core functionality of our app, which allows for marketing promotions at specific locations, integrating exhibitor loyalty plans and giving customers the ability to pre-order concessions. Now with Atom Movie Access, we’re thrilled to provide the technology that will enhance the direct-to-consumer relationship of moviegoers with their favorite theaters.”

There are still several unknowns about the new platform — most notably the pricing for exhibitors. In an interview with Variety, Bakal suggested it would not be prohibitive as Atom Tickets would instead take a cut of subscriptions. The report also noted that no theaters have signed up yet, but the pitching will begin in earnest at a trade show next week in Las Vegas.

Why resort to rock, paper, scissors to see which members of your early-stage startup or investment firm get to attend Disrupt SF 2019? Group discounts make it possible to bring the whole team, and that means more inspiration, connection and opportunity for your company.

TechCrunch offers group discounts for every pass level, so don’t miss your chance to show up in force at Moscone North on October 2-4. Your whole team can reap the benefits that come from hearing world-class speakers — tech titans, up-and-coming founders, startup investors — discussing crucial issues. Network in Startup Alley where hundreds of outstanding early-stage startups gather to show their stuff. Catch the Startup Battlefield competition to see who’ll win the $100,000 prize. And that’s merely the tip of the Disrupt iceberg.

Keep in mind that the group discount pricing applies to passes you buy all at once. Here’s everything else you need to know about Disrupt SF group discounts.

Group Innovator Pass: Buy five or more passes and get a 20 percent discount. Need 10 or more passes? Email us for a price quote at events@techcrunch.com. An Innovator Pass provides access to the Main Stage, Next Stage, Q&As, workshops, CrunchMatch, networking receptions and the Disrupt App, which lets you communicate with other attendees.

Group Founder Pass: Buy two or more passes and you’ll get a 10 percent discount. Your Founder Pass gets you the same benefits as an Innovator Pass but at an already discounted rate — but you have to be a (co)founder of a company (of any size).

Group Investor Pass: Purchase two or more passes to get a 10 percent discount. An Investor Pass provides the same benefits as an Innovator pass, PLUS access to the Investor Lounge, an invitation to investor-only reception and two hours of private meeting space.

Group Expo Only Pass: If you want to buy Expo Only Passes in bulk (10 or more), email events@techcrunch.com for a price quote. An Expo Only Pass grants access to the Startup Alley expo floor, workshops and a lite version of the Disrupt App.

Group Startup Alley Exhibitor Packages: If you’re interested in purchasing more than one Startup Alley Exhibitor Package, email startupalley@techcrunch.com for more information. This package includes exhibit space for one day, use of the Startup Alley Lounge, access to the media list and two or three Founder Passes, depending on when you book.

Disrupt San Francisco 2019 takes place October 2-4. We’re making it easy to bring the whole team, cover all the action, connect with more people and increase your opportunity. What? You’re flying solo? Then get your early-bird ticket now and save up to $1,800. No matter how you get there, we can’t wait to see you in San Francisco!

The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 9am Pacific, you can subscribe here.

1. HUD hits Facebook with housing discrimination charges over ad targeting

The U.S. Department of Housing and Urban Development this morning hit Facebook with charges of housing discrimination. The filing states that Facebook has violated the Fair Housing Act through its ad-targeting tools, which allow sellers to limit listings based on categories like race, sex and nation of origin.

In a statement offered to TechCrunch, Facebook said it was “surprised” by the decision. A spokesperson for the company went on to discuss “significant steps” taken to address the discrimination detailed in HUD’s filing.

2. Apple ‘sorry’ for latest MacBook keyboard woes

It’s kind of an apology. “We are aware that a small number of users are having issues with their third-generation butterfly keyboard and for that we are sorry. The vast majority of Mac notebook customers are having a positive experience with the new keyboard.”

3. Palantir wins $800M contract to build the US Army’s next battlefield software system

The Washington Post reports that the Silicon Valley data analytics company was tapped over traditional defense contractor Raytheon on the project, which tasks Palantir with delivering a comprehensive combat intelligence hardware and software suite to replace the Army’s outdated system.

4. Microsoft gives 500 patents to startups

Microsoft announced a major expansion of its Azure IP Advantage program, which provides its Azure users with protection against patent trolls. Even more interesting, Microsoft is also donating 500 patents to startups in the LOT Network.

5. Kong raises $43M Series C for its API platform

One area the company plans to especially focus on is security — in addition to its existing management tools, where Kong also plans to add more machine learning capabilities over time.

6. Spotify is testing Premium Duo for €12.49 per month

This subscription tier is designed for couples, roommates and all combinations of two persons who live under the same roof. It is a bit more expensive than a Premium account and a bit less expensive than a Family account.

7. Netflix is still too cheap

Scaleworks co-founder Ed Byrne argues that Netflix could probably be cash-flow profitable without reducing investment in content by implementing some pricing model changes.

A program that allows drug agents to obtain a pool of billions of call records from AT&T is “still active,” according to a watchdog report.

The report, published Thursday by the Justice Department inspector general, confirmed the program — named in the report only as Project C — continues to provide access to “billions” of domestic and international call records to Drug Enforcement Administration agents. The program allows agents to pull information about the callers and when and where a call was made from the telecoms provider operating the program without requiring a court order.

Details of Project C — known internally as Hemisphere — was first revealed in 2013, almost a decade after the program first began in 2007. According to the watchdog report, the telecoms provider — said to be AT&T — “maintains and analyzes” its own collection of bulk phone record data and allows access to several law enforcement agencies.

Hemisphere is said to collect more phone records than the National Security Agency’s once hotly contested phone records collection program, first disclosed by whistleblower Edward Snowden. The NSA’s program collected some 500 million call records in 2017 but was effectively shuttered last year.

The AT&T-run program collects information on every call that passed through one of its systems, including by other cell carriers and network providers. The database reportedly contains call records dating back three decade, including the location of callers. It also provides IMSI and IMEI numbers to identify callers.

But the Justice Department’s watchdog said the program posed legal problems because agents may need a higher authority to access the data than an agency-issued subpoena, which doesn’t require judicial oversight.

Bill Blier, deputy inspector general for the Justice Department, said the DEA “failed to conduct a comprehensive legal analysis prior to using its administrative subpoena authority.”

The watchdog recommended the DEA issue a legal opinion on the permissible uses of the program.

Law enforcement were accused of using the database for “parallel construction,” a way of allowing police to discover potentially criminal acts but reverse-engineer their findings to prevent public disclosure of the database. But the watchdog found “nothing inherently inappropriate” about using parallel construction to re-create information for use in a court filing.

DEA spokesperson Katherine Pfaff told TechCrunch that the agency “agrees” with the watchdog’s recommendations and “has already begun enhancing these processes.” The DEA declined to name the telecoms provider.

AT&T did not immediately comment.