FTX Clashes with US Tax Authorities Over ‘Enormous’ $24B Tax Demand

• FTX is contesting a substantial $24 billion tax bill imposed by the Internal Revenue Service’s (IRS) tax authorities.
• The proposed tax amount lacks substantiation and is not readily determinable, according to FTX.
• IRS’s proposed tax bill would significantly impede the chances of creditors obtaining any meaningful recovery.

The Internal Revenue Service (IRS) in the United States has put forth a tax bill of $24 billion against the bankrupt cryptocurrency exchange, FTX. FTX, in response, has contested the proposed amount, arguing that it is “enormous” and lacks substantiation. The exchange claims that the IRS’s assertions lack merit and a valid basis.

FTX, currently undergoing bankruptcy proceedings, contends that the proposed tax bill would significantly hinder the chances of most creditors, who are victims of fraud, of any meaningful recovery.

The proposed tax bill “would effectively prevent most of FTX’s creditors—themselves victims of fraud—from obtaining any meaningful recovery. It just makes no sense that a company that lost many billions of dollars would have a substantial tax liability, much less one for $24 billion,” FTX said in the court filing. 

The cryptocurrency exchange challenged the IRS’s claims, asserting that the amount specified was not readily determinable and could not be estimated.

Furthermore, FTX also criticized what it referred to as the U.S. official’s “Alice in Wonderland” argument, asserting that it lacked legal support. The burden, according to FTX, lies with the debtors to disprove the IRS’s unexplained $24 billion claims.

Moreover, FTX added that the tax authorities gave the impression that several complicated issues were “necessary to determine the Debtor’s tax liability” and that determining the amount could take months to resolve. 

“This issue is not complicated at all. The Debtors petitioned for bankruptcy because they lost massive sums of money, and those enormous losses do not give rise to any tax liability, much less a multi-billion dollar tax liability,” said FTX.In October, FTX and affiliated debtors announced a proposed settlement for customer property disputes that may see customers reclaim 90% of their lost assets in 2024.