According to The Block, the United States Internal Revenue Service (IRS) claims that FTX owes as much as $24 billion in unpaid taxes, and FTX lawyers are requesting the IRS to disclose its calculation method. According to a report in September, the total amount of claims filed by customers is $16 billion, while FTX still has a $9 billion shortfall in compensation funds.
IRS demands taxes far exceeding FTX’s existing funds
IRS states: Revised from $44 billion to $24 billion
In a new filing submitted to the Delaware bankruptcy court on Sunday, FTX lawyers argued that the IRS should substantiate its claims against FTX and explain how it estimated the additional tax liability.
FTX claims it does not owe any debt to the IRS, but the IRS is requesting taxes as high as $24 billion.
According to a report in mid-October, FTX still has a $9 billion shortfall in compensation funds. Information provided by bankruptcy trustee Kroll 9/11, based on user statistics from the FTX.com and FTX US platforms, shows that a total of 36,075 users have filed claims totaling $16 billion. Does this mean that if FTX pays $24 billion in taxes, there will be no money left to compensate claimants?
The lawyers wrote in the document that FTX has never distributed dividends or profits and has “never received an amount anywhere near what would support the IRS’s $24 billion tax claim.” Instead, FTX has suffered significant losses.
The only source for the IRS to recover is to take compensation from the victims. Since there is no basis for making any tax claims against the debtors, the IRS’s actions will only delay the distribution of compensation to the truly injured parties.
According to The Block, the IRS initially filed a preliminary claim in April, amounting to about $44 billion. It was revised to $43 billion in September and has now been reduced to $24 billion in November.
The $24 billion owed to the IRS is related to income taxes, employment taxes, and fines owed by FTX and its affiliates from 2018 to 2022. This is not the final figure as the IRS is still conducting an audit.
FTX disputes this claim and states that it and Ernst & Young have responded to over 2,300 IRS information requests and provided the requested documents, except for a few that will be provided by January 15, 2024.
In the filing submitted yesterday, FTX insisted that its proposed timeline must be approved to avoid “indefinite delays in distributing funds to victims.” The next hearing for the FTX bankruptcy case is scheduled for Wednesday, December 13.
FTX
IRS
Further reading
IRS lists top 10 fraud cases in 2023: fraudulent COVID relief claims, lottery tax scams, with cryptocurrencies accounting for 40%
IRS Criminal Division Chief: Decrease in cryptocurrency money laundering cases, but still a significant amount of tax evasion issues.