continuing financial turmoil FTX, which emerged following the departure of founder Sam Bankman-Fried (SBF), faces another major obstacle as the Internal Revenue Service (IRS) claims a massive $24 billion tax claim. If these claims are proven, any chance of creditor recovery for the beleaguered exchange could be eliminated altogether.
IRS Files $24 Billion Tax Bill
After SBF, FTX’s leadership embarked on an extensive search through exchange databases and successfully discovered approximately $7 billion worth of assets, almost half of which consisted of cryptocurrencies. However, during these recovery efforts, the IRS significantly added to FTX’s difficulties. The IRS claims that the tax investigation is still ongoing after multiple corrections were submitted to the original claim and the final payment amount may still change.
FTX’s Struggle Over Tax Claims
Initially facing a huge IRS claim of $44 billion, this amount was later revised to $24 billion and spread across various entities within the FTX conglomerate. A significant portion of this alleged liability is related to unpaid partnership taxes amounting to $20.4 billion, with the remaining amount related to payroll and other income tax obligations.
Also Read: FTX Bankruptcy Update: Revised Reorganization Plan Scheduled for Mid-December 2023
Legal conflict in court today
FTX, seeking to counter its astronomical tax bill, disputed the figures, claiming they were too disproportionate to its profits. Despite FTX’s attempts to dismiss the claims, the court rejected their claims. However, exchanges are now seeking more reasonable and accurately substantiated figures from the IRS.
Today, December 12th, marks a big moment as FTX and the IRS face off in court. In particular, FTX has shifted from seeking outright layoffs to calling for a more just, understandable and realistic tax claim consistent with the platform’s historical profits.