IRS Tax Bill Jeopardizes Creditors: FTX Signals Delay in User Fund Recovery

The clash between the Internal Revenue Service (IRS) and FTX has escalated yet again, as FTX’s legal representatives demand substantiated proof for the IRS’s substantial $24 billion tax claim against the bankrupt exchange. In a filing to a Delaware bankruptcy court, FTX contested the IRS’s assertion, dismissing it as baseless and excessive.

Contentious Claims: No Leg to Stand On?

As per the latest update, FTX strongly disagrees with the IRS’s claim, pointing out that the exchange never made any money or paid any dividends during its brief operational span. The lawyers for FTX pushed back against the outrageous $24 billion claim, pointing out that the exchange had already lost money and couldn’t even come close to making the claimed taxable income.

However, the IRS first said that FTX owed a huge amount of money—$44 billion. In September, they lowered that amount to $43 billion, and now they’ve settled on $24 billion. But FTX doesn’t agree with this amount, calling it ridiculous and devoid of any real support.

IRS’s Standpoint Vs FTX’s Defense

The IRS has stuck to its estimates, saying it has the right to demand the amount and that FTX has to show that its estimates are wrong. In reaction, FTX called the IRS’s position an “Alice in Wonderland argument” and questioned the IRS’s assumption that it was right.

The company FTX and its accounting firm, EY, have responded fully to the IRS’s requests and provided a lot of evidence to back their position. The lawyer also revealed that FTX has responded to 2,300 requests for information from the tax department, providing all the requested documents, except for some documents that will be transferred in January 2024.

And the Battle Continues.

As the court case goes on, FTX wants a structured program to make it easier to pay creditors and avoid more delays in paying victims. The FTX bankruptcy case is about to reach a turning point with the meeting on December 13.

The company FTX filed for bankruptcy in November after a lot of trouble. Post-bankruptcy, FTX’s former CEO, Sam Bankman-Fried, was found guilty of scamming users and investors. Against this chaotic background, the fight with the IRS gets worse, indicating a long court battle ahead.

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