IRS tax bill will swipe creditors of any ‘meaningful recovery,’ says FTX

A proposed $24 billion tax bill from the United States Internal Revenue Service (IRS) will likely suck up any “meaningful recovery” that was meant for victims of FTX, according to the bankrupt crypto exchange.

The United States tax authority has been trying to chase tax arrears from the crypto exchange and its sister firm, Alameda Research, since May. The IRS initially claimed $44 billion across 45 separate claims against FTX and its subsidiaries on May 10 but recently brought that number down to $24 billion.

However, in a Dec. 10 filing in the U.S. Bankruptcy Court for the District of Delaware, FTX said the claims put forth by the IRS were meritless and would also impact the funds meant to reimburse affected FTX users.

“That would effectively prevent most of FTX’s creditors—themselves victims of fraud—from obtaining any meaningful recovery,” the firm said.

“There is simply 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,” FTX’s lawyers said, adding:

“The IRS’s reliance on its own processes only serves to delay distributions to those truly injured.”

FTX claimed the $24 billion claim wasn’t subject to an estimation, and it lacks legal merit.

“This Alice in Wonderland argument has no support in the law.”

However, the IRS is still in the process of completing its audit, which could take another eight months, according to the filing.

It is understood that FTX and the U.S. government will argue over the legitimacy of the claim in court on Dec. 12.

Related: Sam Bankman-Fried will not file any post-trial motions, say lawyers

Meanwhile, FTX’s administrators have now recovered about $7 billion in assets, including $3.4 billion of cryptocurrencies.

Its former CEO, Sam Bankman-Fried, was convicted on all seven fraud-related charges in November and is currently in Brooklyn Metropolitan Detention Center awaiting a sentencing verdict scheduled for March 28, 2024.

Magazine: Slumdog billionaire 2 — ‘Top 10… brings no satisfaction’ says Polygon’s Sandeep Nailwal