FTX Warns IRS Tax Bill Poses Threat to Creditors’ Recovery Prospects’

Crypto firm FTX contests the $24 billion IRS tax bill in bankruptcy proceedings. In a new development, the insolvent cryptocurrency exchange currently undergoing bankruptcy proceedings, FTX Trading, has contested a proposed $ 24 billion tax bill levied by the United States Internal Revenue Service (IRS). FTX, mired in legal woes along with sister firm Alameda Research since May, claims the IRS case has no merits and could block the reimbursement for victimized exchange users.

The IRS originally claimed $44bn in tax arrears across 45 separate claims against FTX and its subsidiaries. However, The tax authority recently revised the figure to $24 billion in its communication. FTX, in a filing dated December 10 to the U.S. Bankruptcy Court for the District of Delaware, strongly opposed the claims by the IRS in suits that it claimed were baseless and would otherwise derail the money set aside to compensate affected its users.

Tax Turmoil: FTX’s Battle Against IRS Claims

FTX, for its part, had argued that the $24 billion claim by the IRS had no legal standing and wasn’t sufficiently justified by any reasonable estimation. The exchange accused the IRS of funding its internal processes. This allegedly caused unwarranted delays in distributing funds to the rightful victims of the FTX fiasco. This has resulted in frustration and dissatisfaction within the affected community. In a statement, FTX’s lawyers said,

“There is no basis to support the IRS’s meritless claims that the Debtors owe tax in an amount that is orders of magnitude greater than any income the Debtors ever earned.”

It further criticized the IRS argument as an “Alice in Wonderland” scenario with no legal foundation. It objected to the IRS’s actions. Despite the objections, the IRS is moving forward with its audit process, with the filing estimating it will take around eight more months. The U.S. government’s $24 billion claim against FTX has been set for litigation on December 12.

Meanwhile, administrators overseeing its bankruptcy proceedings have recovered some $7 billion in assets, including $3.4 billion in cryptocurrencies. In November, Sam Bankman-Fried, the former CEO of FTX, faced conviction on seven fraud-related charges. He is in the Brooklyn Metropolitan Detention Center, awaiting a sentencing verdict set for March 28, 2024.

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