IRS Chases FTX for a Staggering $24 Billion in Unpaid Taxes: Legal Team Slams Claim as Absurd, Warns of Delayed Repayment to Users
FTX Faces Enormous Tax Claim Amidst Bankruptcy Proceedings
As the bankrupt cryptocurrency exchange FTX works to recover assets to repay creditors, the United States Internal Revenue Service (IRS) made a shocking move. In April this year, the IRS initially demanded $44 billion in unpaid taxes from FTX, later revising the figure to $43 billion in September, and finally lowering it to $24 billion in November.
Further reading：The Verdict Is In: SBF Convicted on All Charges in Historic Crypto Fraud Case
FTX Legal Team Challenges IRS Claim
In response, FTX’s lawyers filed documents in a Delaware bankruptcy court on Sunday, urging the IRS to provide evidence for their claim and explain their calculation of FTX’s supposed back taxes. FTX firmly believes it owes no taxes, yet the IRS is demanding $24 billion in unpaid taxes, an amount triple the loss incurred by FTX’s creditors.
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FTX’s legal team argued that during its three-year operation, FTX never distributed dividends or profits and “never realized any amounts that would support the IRS’s nearly $24 billion tax claim.” The IRS’s only source of recovery, they claim, would be to take compensation money from the victims, ultimately delaying the reimbursement to the actual victims.
IRS’s Tax Claim Tied to Income, Employment Taxes, and Fines
The IRS asserts that the $24 billion tax bill is related to income, employment taxes, and fines owed by FTX and its affiliates from 2018 to 2022. This amount is not final, as the IRS is still auditing and plans to amend the $24 billion claim, reclassifying at least some of the debt as unsecured, which has a lower priority.
Further reading：CFTC Chairman Warns of Potential Repeat of FTX Incident: A Call for Immediate Regulatory Action in the Crypto Market
FTX Criticizes IRS’s Tax Pursuit as Absurd
FTX criticized the IRS’s tax pursuit as “absurd and nonsensical.” The exchange, alongside Ernst & Young, responded to over 2,300 IRS information requests and provided nearly all requested documents, except for some due by January 15, 2024.
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The IRS maintains that its estimates are presumed correct unless proven otherwise, placing the burden of proof on FTX. In contrast, FTX likened the IRS’s argument to ‘Alice in Wonderland,’ insisting that its proposed timeline must be approved to avoid “indefinitely delaying distributions to victims.”
The next hearing in the FTX bankruptcy case is scheduled for today (12/13).
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Keywords: FTX Bankruptcy, IRS, Unpaid Taxes, Cryptocurrency Exchange, Tax Claim, Legal Challenge, United States Internal Revenue Service, Bankruptcy Court, Delaware, Repayment Delay, Victims Compensation, Ernst & Young, Tax Audit, Unsecured Debt, Financial Scandal
