The United States Internal Revenue Service (IRS) is pursuing a $24 billion tax claim against the bankrupt crypto exchange, FTX, potentially derailing any hopes of a “meaningful recovery” for the exchange’s victims.
The IRS has been seeking to collect outstanding taxes from FTX and its sister company, Alameda Research, since May, initially claiming a staggering $44 billion across 45 separate claims.
However, in a recent filing with the U.S. Bankruptcy Court for the District of Delaware on December 10th, FTX vehemently contested the IRS’s claims, deeming them without merit and detrimental to the compensation meant for affected FTX users.
FTX argued that the IRS’s demands could effectively prevent most of its creditors, who are themselves victims of fraud, from receiving any substantial reimbursement.
FTX’s lawyers asserted that there was no factual basis for the IRS’s claims, as they far exceeded any income ever earned by the exchange.
The exchange contended that the $24 billion claim was not based on any reasonable estimate and had no legal validity.
Despite FTX’s protests, the IRS is still in the process of conducting its audit, which is expected to take another eight months, as indicated in the filing.
The impending legal battle over the legitimacy of the IRS’s claim is set to take place in court on December 12th.
In the meantime, FTX’s administrators have managed to recover approximately $7 billion in assets, including $3.4 billion in cryptocurrencies.
However, the former CEO of FTX, Sam Bankman-Fried, faced a significant setback in November when he was convicted on all seven fraud-related charges.
He is currently being held at the Brooklyn Metropolitan Detention Center, awaiting sentencing, which is scheduled for March 28, 2024.
As FTX grapples with the IRS’s substantial tax claim and its former CEO’s legal troubles, the fate of the exchange and its creditors hangs in the balance, with the upcoming court battle holding the key to determining the legitimacy of the IRS’s demands and the potential for meaningful recovery for FTX’s victims.
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