IRS recovers $24 billion, FTX victims may lose compensation

According to documents filed by FTX attorneys in Delaware Bankruptcy Court on Sunday, they are asking the IRS to confirm its claim against FTX and provide detailed instructions on how it estimates the back taxes due. The move is the latest development in a months-long dispute between the IRS and the FTX bankruptcy estate over how much unpaid taxes the bankrupt exchange and its affiliates owe the government.

FTX claims it owes nothing to the IRS, but the tax agency is demanding up to $24 billion, more than three times the amount it currently must pay, to cover creditor losses.

Lawyers point out that FTX has never distributed dividends or earnings to shareholders in its three years of operation and has been unable to provide the funds to support the IRS's $24 billion tax claim. In fact, FTX lost a lot of money during this time.

“The IRS’s only source of recovery is to collect compensation from victims. However, with no legal basis to file a tax claim against a debtor, the IRS relies solely on its own procedures, which only delays compensation for those who were truly injured Assignment," the lawyers noted in the filing.

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From US$44 billion to US$24 billion

The IRS originally claimed it was missing a much larger amount, filing an initial claim in April, about $44 billion. However, in September, this figure was revised to $43 billion. In November, this number dropped again to $24 billion.

According to the IRS, FTX and its affiliated entities owe a total of approximately $24 billion in income taxes, employment taxes and penalties between 2018 and 2022. The IRS said the number is not final because it continues to audit the company.

FTX called the claim "ridiculous and baseless." Both FTX and Ernst & Young responded to more than 2,300 IRS information requests and provided nearly all documents requested by the IRS, except for some documents that were due to be provided by Jan. 15, 2024, the filing said.

The Internal Revenue Service (IRS) argued that its estimates were assumed to be correct and that it was FTX's burden to prove otherwise. FTX called the IRS’s announcement an “Alice in Wonderland controversy.”

FTX insisted in yesterday's filing that its proposed timetable must be approved to avoid "indefinite delays in the distribution of funds to victims". The next hearing in FTX’s bankruptcy case is scheduled for Wednesday, December 13.

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Where is the controversy?

FTX’s attorneys filed new documents in Delaware Bankruptcy Court rebutting the IRS’s claims. The dispute involves unpaid taxes owed by the FTX exchange and its affiliates.

Although FTX claimed that it did not owe any debt to the IRS, the IRS filed a claim of up to $24 billion. This dispute not only involves tax issues, but also involves the bankruptcy of the FTX exchange and the compensation of victims.

Based on the progress of the Binance Exchange case, the author of Meta Universe Headlines (WeChat ID: TopMetaNews) believes that there is a high possibility that the court will eventually determine that FTX Exchange owes the US IRS a huge amount of tax, so for the victims He said that he should pay attention to the court's judgment and take necessary measures to protect his rights and interests, and may even need to seek other ways to make up for losses.

However, this dispute is not only about the dispute between FTX and the IRS, but also involves the compliance and regulatory challenges of the cryptocurrency industry. Regardless of the final outcome, this incident is a reminder to the entire industry that cryptocurrency companies need to pay more attention to compliance and transparency to build trust and a stable development environment.

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About FTX Exchange

A year ago, Sam Bankman-Fried’s cryptocurrency fortunes came after the FTX exchange, which he led as CEO, and sister trading firm Alameda Research, which he co-founded and owned, were unable to recover from a huge hole in their balance sheets. The empire collapsed dramatically. Customers lost billions of dollars.

A month ago, Sam Bankman-Fried was convicted of defrauding customers, lenders and investors of FTX, the cryptocurrency exchange he co-founded and led until its dramatic collapse a year ago, when customers lost dozens billion in what prosecutors called "one of the largest financial transactions." Fraud in American History. ”

Bankman-Fried was found guilty of two substantive counts of wire fraud against FTX lenders and customers, and five counts of criminal conspiracy, including charges of conspiracy to commit wire fraud, as well as commodities fraud, securities fraud and money laundering, Inner City Press reports. He faces up to 115 years in prison.

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