U.S. Government Claims Against FTX Expected to Reach $3-5 Billion: Court Filing
The U.S. government is anticipated to make claims totaling between $3 and $5 billion against the bankrupt crypto exchange FTX, according to a recent court filing. The final amount is subject to change and negotiations with relevant authorities.
The filing from the United States District Court for the Southern District of New York states that while the exact amount of U.S. tax claims remains uncertain, once all government and tax claims have been paid, the remaining funds can be used to distribute among shareholders.
Itโs important to note that under Chapter 11 priorities, FTX customers, Alameda Research lenders, administrative expenses, and non-governmental creditor claims will be paid before any government and tax claims.
The Proposal for SNDY Remission Proceeds
The debtors propose that 100% of the โSNDY Remission Proceeds,โ which refers to funds or assets returned to the FTX estate by the U.S. Attorneyโs Office for the Southern District of New York or other governmental authorities as part of a remission process, be used to distribute among FTX.com customers and Alameda lenders. This includes settling with BlockFi as well, as stated in the court filing.
After covering administrative expenses and non-governmental creditors, up to 25% of the distributable value will be allocated to pay claims for U.S. Federal income taxes. The remaining amount will be used to settle claims by the Commodity Futures Trading Commission and other government authorities.
$24 Billion in Unpaid Taxes
In December, it was revealed that FTX owed $44 billion in unpaid taxes according to the U.S. Internal Revenue Service. However, this amount was later adjusted to $24 billion. It is unlikely that the full amount will be recovered.
In a court filing dated September 11, 2023, the FTX estate reported recovering approximately $7 billion in assets. However, due to the subsequent crypto bull market, this figure has likely increased in U.S. dollar value in the following months.
FTX filed for bankruptcy protection in November 2022, and its former CEO, Sam Bankman-Fried, was convicted of defrauding FTX users and investors in November 2023. He is currently awaiting sentencing.
Recently, FTXโs current CEO, John J. Ray III, disputed Bankman-Friedโs claim that there was no harm to customers during the platformโs collapse. He criticized it as โrecklessโ and โfalse.โ
Hot Take: The Impact of Government Claims on FTX
The U.S. governmentโs claims against FTX are significant and are expected to range from $3 to $5 billion. These claims will impact the distribution of funds among various stakeholders once all government and tax claims have been paid.
FTX customers, Alameda Research lenders, administrative expenses, and non-governmental creditor claims will take priority over government and tax claims under Chapter 11 guidelines.
The Proposal for SNDY Remission Proceeds
- All โSNDY Remission Proceedsโ returned to the FTX estate by governmental authorities will be used for distributions to FTX.com customers and Alameda lenders.
- A settlement with BlockFi is also part of this proposal.
After covering administrative expenses and non-governmental creditors, a portion of the distributable value will be allocated to pay U.S. Federal income taxes. The remaining funds will be used to settle claims by the Commodity Futures Trading Commission and other government authorities.
$24 Billion in Unpaid Taxes
The U.S. Internal Revenue Service initially claimed that FTX owed $44 billion in unpaid taxes, but this amount was later adjusted to $24 billion. However, it is unlikely that the full amount will be recovered.
As of September 11, 2023, the FTX estate had already recovered approximately $7 billion in assets. The value of these assets has likely increased due to the subsequent crypto bull market.
FTX filed for bankruptcy protection in November 2022, and its former CEO, Sam Bankman-Fried, was convicted of defrauding FTX users and investors in November 2023. He is currently awaiting sentencing.
John J. Ray III, the current CEO of FTX, recently disputed Bankman-Friedโs claim that no harm was done to customers during the collapse of the platform. He criticized this claim as โrecklessโ and โfalse.โ
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