FTX said it was experiencing delays in recovering user funds due to the IRS’s demand for $24 billion in unpaid taxes.
The Internal Revenue Service must substantiate its claims against FTX and provide a method for estimating back taxes, FTX lawyers said in a new filing Sunday in Delaware Bankruptcy Court. The move is the latest in a months-long dispute between the IRS and the FTX Bankruptcy Foundation over how much the bankrupt exchange and its affiliates owe the government in unpaid taxes.
FTX claims it doesn’t owe the IRS anything, but the agency is now demanding $24 billion, more than three times the amount the estate needs to make creditors whole.
During its brief three-year run, FTX has never distributed dividends or profits and “has never earned anything close to the amount that could support its IRS claim for $24 billion in taxes,” the lawyers wrote. Rather, FTX added that it suffered huge losses.
“The IRS’s only way to redress is to take compensation away from victims. Since there is no basis to assert a tax claim against the debtor, the IRS’s reliance on its own process will only serve to delay distribution to those who were actually harmed. .” The lawyers argued in the document.
From $44 billion to $24 billion
The IRS initially said it owed much more, filing an initial claim amounting to about $44 billion in April. Last September, this amount was revised to $43 billion. By November, that number had fallen to $24 billion.
The IRS said FTX and its affiliates owe $24 billion from 2018 to 2022 related to income taxes, employment taxes and penalties. The numbers are not final yet as the IRS continues its audit.
FTX said the claims were “absurd and without merit.” FTX and accounting firm EY both responded to more than 2,300 IRS requests for information and provided nearly all documents requested by the IRS, with some exceptions that will be provided by Jan. 15, 2024, the documents show.
The IRS argues that its estimates are presumed to be accurate, and that if they are not, the burden of proof is on FTX. FTX called the IRS’ statement an “Alice in Wonderland argument.”
In a filing yesterday, FTX argued that the proposed schedule should be approved to avoid “indefinite delays in distribution to victims.” The next hearing in the FTX bankruptcy case is scheduled for Wednesday, December 13.
FTX file for bankruptcy Last November. Former CEO Sam Bankman-Fried said: convicted November 2 Defrauding FTX users and investors.
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