FTX Debtors Raise Concerns Over IRS Tax Claim
Debtors of FTX have expressed their worries about the Internal Revenue Service’s (IRS) claim of $24 billion in taxes, stating that it could hinder the return of customer funds. In a filing submitted on Sunday, the debtors argued that their earnings were significantly lower than the amount claimed by the IRS and that they actually incurred substantial losses.
“The only source of recovery for the IRS is by taking recoveries away from victims. As there is no basis to assert any tax claim against the Debtors, the IRS’s reliance on its own processes only serves to delay distributions to those truly injured,” said lawyers representing the bankrupt exchange.
The IRS initially alleged claims of $43 billion but later revised it to $24 billion. FTX’s debtors contested that the IRS failed to provide a basis for its claims, and the US previously stated that the IRS’s claims “are not subject to estimation.” Consequently, it falls on the FTX debtors to disprove the claims, which could take several months to resolve.
“These cases should not be delayed by an IRS process that is akin to determining whether a shipwreck sits at 1,000 feet or 3,000 feet below sea level. The import is the same—the ship is underwater,” added the lawyers.
Resolution of IRS’s Claims Crucial for FTX Bankruptcy Case
The resolution of the IRS’s claims is essential for the progress of FTX’s bankruptcy proceedings. The debtors argue that an additional lengthy fact discovery period is unnecessary since the IRS has been evaluating the tax issues for months. An evidentiary hearing is scheduled for confirmation in February next year, allowing both parties to present their positions and provide briefing on the issues. However, further disputes between the FTX debtors and the IRS could cause a delay in the bankruptcy plan. The US has provided an “eight-month estimation schedule” for further IRS investigation.
FTX declared bankruptcy in November of the previous year and has been facing additional challenges with its former CEO, Sam Bankman-Fried, being found guilty of fraud. Bankman-Fried’s sentencing hearing is set for February 2024. In late November, FTX received approval from a bankruptcy court to sell its stakes in digital trusts managed by Grayscale Investments, which form a crucial part of FTX’s plan to manage its bankruptcy.
FTX’s Efforts to Recover Assets and Address Debts
Since filing for bankruptcy last year, FTX has been focused on recovering assets and resolving its complex network of debts, including obligations to customers who invested cash and cryptocurrencies on the platform. So far, FTX’s administrators have successfully recovered around $7 billion in assets, including $3.4 billion in crypto, highlighting the scale and complexity of the company’s financial entanglements.
Hot Take: FTX Debtors Challenge IRS Over Massive Tax Claim
Debtors of FTX are raising concerns over the Internal Revenue Service’s claim of $24 billion in taxes, arguing that it could hinder the return of customer funds. The IRS initially alleged claims of $43 billion but later revised it to $24 billion. The debtors contest that the IRS failed to provide a basis for its claims and believe that there is no valid tax claim against them. Resolution of the IRS’s claims is crucial for the progress of FTX’s bankruptcy proceedings, but disputes between the debtors and the IRS could cause delays. FTX continues its efforts to recover assets and address its complex debts.
By
By