FTX faces US officials’ tax claims prior to compensation of bankruptcy victims

U.S. officials will seize money from victims of bankrupt crypto firm FTX Trading Ltd. unless a judge rejects the government’s demand for $24 billion in unpaid taxes.

The Internal Revenue Service (IRS) must substantiate its claim against FTX and show how it assessed the taxes it owes, FTX lawyers said in a new filing. The move is the latest in a months-long dispute between the IRS and FTX’s bankruptcy estate over how much the failed exchange and its affiliates owe the government in unpaid taxes.

While FTX claims it owes nothing to the IRS, the agency wants as much as $24 billion, more than three times the amount the estate currently has, to try to repay creditors.

“This Alice in Wonderland argument has no support in the law.”

FTX filing

The IRS initially said FTX owed even more money, filing initial claims in April for about $44 billion. In September, that amount was changed to $43 billion. In November, that figure dropped to $24 billion.

The IRS claims the $24 billion in debt relates to income taxes, employment taxes, and penalties owed by FTX and its affiliates from 2018 to 2022. This is still not the final figure as the IRS continues to audit. FTX called the lawsuit “absurd and without merit.”

FTX filed for bankruptcy last November, while its former CEO Sam Bankman-Fried was convicted of defrauding FTX users and investors in November of this year. FTX’s next bankruptcy hearing is scheduled for Wednesday, Dec. 13. Bankman-Fried will be sentenced on Mar. 28, 2024. In total, he faces up to 110 years in prison.