The tax dispute between the U.S Internal Revenue Service (IRS) and the bankrupt cryptocurrency exchange FTX continues. In their latest submission to the court, FTX lawyers requested information on how the IRS calculated the unpaid tax debt, initially set at $44 billion, but later revised to $24 billion.
The FTX – IRS Dispute Continues
In their latest submission to the Delaware bankruptcy court, FTX lawyers requested the IRS to prove its claim against FTX and explain how the alleged tax amount was calculated. This move is part of an ongoing dispute between the IRS and FTX concerning how much tax debt the bankrupt cryptocurrency exchange and its affiliates owe to the government.
Despite FTX claiming it owes no tax debt to the IRS, the tax department claims a debt of $24 billion, more than three times the amount the cryptocurrency exchange currently has to compensate its creditors. The lawyers argue that FTX never distributed any dividends or profits during its short three-year existence, and that it never earned anything close to the amounts that could support the IRS’s $24 billion tax claim, while claiming that FTX has lost a significant amount of money:
The only source of recovery for the IRS is to secure recoveries from the victims. As there is no basis for making any tax claim against the debtors, the IRS’s reliance on its processes only serves to delay distributions to those who are truly harmed.
From $44 Billion to $24 Billion
The IRS initially claimed the tax debt of FTX was higher, first calculating a debt of approximately $44 billion in April this year. The IRS revised this amount to $43 billion in September, and by November, it was down to $24 billion.
The IRS claims that the outstanding $24 billion is related to income taxes, employment taxes, and penalties owed by FTX and its affiliates from 2018 to 2022. This is still not a final figure as the IRS audit continues. The bankrupt cryptocurrency exchange has described this claim as “absurd and baseless”. According to the court document, both FTX and the accounting firm EY have responded to more than 2,300 information requests by the IRS and have provided almost all the documents requested by the IRS, except those to be provided by January 15, 2024. The IRS argues that its estimates have the presumption of accuracy and the burden of proof is on FTX.
In its submission to the court yesterday, FTX insisted that a program it proposed to prevent indefinite delays in distributions to victims must be approved. The next hearing of the FTX bankruptcy case will be held on December 13.
