FTX and IRS Battle Over $24 Billion Tax Claim

FTX Trading is reportedly currently locked in a legal dispute with the Internal Revenue Service (IRS) over a $24 billion tax claim.

The outcome of this case could have significant implications for the victims of FTX’s fraudulent activities, Bloomberg reported Tuesday (Dec. 12).

The IRS has made a claim for $24 billion in unpaid taxes against the cryptocurrency firm, according to the report.

However, FTX is challenging the validity of this claim and is seeking a court procedure to determine the actual amount owed, the report said. The company argues that a court-supervised estimation process will reveal that FTX incurred losses during its three-year operation, making the IRS claim unsubstantial.

FTX is also concerned about the potential impact of the IRS claim on the victims of its fraudulent activities, per the report. The company asserts that any money it is compelled to pay to the IRS would further harm these victims.

FTX’s administrators have managed to recover approximately $7 billion in assets, including $3.4 billion worth of cryptocurrencies, which they intend to distribute among the creditors, according to the report.

The IRS maintains that its audit of FTX is still ongoing, making it premature to estimate the tax liability at this stage, the report said. The government argues that the determination of the amount owed should not be made until the audit is complete.

Federal lawyers representing the IRS emphasize that their objective is not to seek a windfall but rather to ascertain the accurate amount of tax liabilities, per the report.

This court battle follows the filing for bankruptcy by FTX last year and the fraud conviction of its founder, Sam Bankman-Fried, in November, according to the report.

The collapse of FTX resulted in a complex web of debt owed to various creditors, including customers who had invested cash and cryptocurrencies on the platform, the report said. Since then, FTX’s administrators have been working to recover assets and resolve the financial mess.

This news comes on the same day that Bankman-Fried’s lawyer said that the fraud trial was unwinnable and that his client did himself no favors by taking the stand.