IRS tax bill will swipe creditors of any ‘meaningful recovery,’ says FTX

A proposed $24 billion tax bill from the US IRS will likely absorb any “significant recovery” intended for FTX victims, according to the bankrupt crypto exchange.

The US tax authority has been trying to pursue tax arrears from the crypto exchange and its sister company Alameda Research since May this year. The IRS initially claimed 44 billion dollars in 45 separate claims against FTX and its subsidiaries in May. 10, but recently reduced that figure to $24 billion.

However, in a statement dated December 10 presentation In a Delaware-based bankruptcy court, FTX said the claims brought by the Internal Revenue Service were “meritless” and would also affect funds intended to reimburse affected FTX users.

Excerpt from FTX Trading's response to the US government's $24 billion tax claim. Source: Kroll

"That would effectively prevent most of FTX's creditors, themselves victims of fraud, from obtaining a meaningful recovery," the firm said.

"There is simply no basis to support the IRS's baseless claims that the debtors owe taxes in an amount that is orders of magnitude greater than any income the debtors have ever earned," FTX attorneys said, adding:

"The IRS's reliance on its own processes only serves to delay distributions to those truly harmed."

FTX stated that the $24 billion claim was not subject to any estimate and has no legal basis.

"This Alice in Wonderland argument has no legal backing."

However, the IRS is still in the process of completing its audit, which could take another eight months, according to the document.

It is understood that FTX and the US government will argue over the legitimacy of the claim in court on December 12.

Related: Sam Bankman-Fried will not file any post-trial motions, lawyers say

Meanwhile, FTX administrators have recovered around $7 billion in assets, including $3.4 billion in cryptocurrency.

The company's former CEO, Sam Bankman-Fried, was condemned by all seven counts related to fraud in November and is currently in the Brooklyn Metropolitan Detention Center awaiting a sentencing verdict scheduled for March 28, 2024.

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