FTX Contests IRS's $24 billion Tax Claim, Fears Impact on Victims' Recovery
Summary:
The bankrupt cryptocurrency exchange, FTX is battling a potential $24 billion tax claim from the US Internal Revenue Service (IRS). FTX argues that this significant claim could undermine any "meaningful recovery" for victims of the exchange. The IRS has been pursuing FTX and relative company Alameda Research for tax arrears since May. The claim, initially amounting to $44 billion, has been reduced to $24 billion. FTX dismisses the IRS's claim as baseless, stating it could hinder the compensation of impacted users. Despite these disputes, FTX administrators report recovery of about $7 billion in assets, including $3.4 billion in cryptocurrencies.
FTX, the bankrupted cryptocurrency exchange, has argued that a potential $24 billion tax demand from the United States Internal Revenue Service (IRS) could squash any hope of "meaningful recovery" for the victims of the exchange. The IRS has persistently been pursuing missing taxes from FTX and its associate company, Alameda Research, since May. Originally, the IRS filed for $44 billion in 45 separate claims against FTX and its affiliates, a figure which has since been reduced to $24 billion. Despite this, in a recent document submitted to a Delaware bankruptcy court, FTX dismissed the IRS's claim as baseless, insisting that it would affect their ability to compensate users who suffered losses. FTX has claimed that the IRS's demand lacks legal ground and is not even valid for estimation.
FTX contested the $24 billion demand by stating, "What it effectively does is prevent most of FTX's creditors—themselves victims of fraud—from getting reasonable restitution." The lawyers representing FTX reinforced their argument by stating, "There simply is no foundation supporting IRS's unfounded claims that the Debtors are liable for an amount of tax far surpassing any income ever made by the Debtors."
FTX has also criticized the IRS for delaying compensation payments to the genuine victims with its proceedings. Meanwhile, the IRS audit seems far from completion, with an expected duration of another eight months. The legitimacy of the claim will be debated in court on December 12th by FTX and the US government.
On the brighter side, FTX's administrators have been successful in recovering around $7 billion worth of assets, out of which $3.4 billion is in the form of cryptocurrencies. Former FTX's CEO, Sam Bankman-Fried, found guilty on seven fraud-related charges in November, currently awaits his sentencing, scheduled for March 28, 2024, at the Brooklyn Metropolitan Detention Center.
Published At
12/12/2023 7:05:50 AM
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