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- 1 FTX lawyers have urged the IRS to substantiate its claim and provide clarity on how it estimated back taxes allegedly owed by the crypto exchange.
- 2 The latest legal filing, submitted to a Delaware bankruptcy court on Sunday, marks another development in the prolonged disagreement.
Amid the ongoing clash between the Internal Revenue Service (IRS) and FTX, the cryptocurrency exchange’s legal team is pressing the IRS to justify its claim and clarify the methodology behind estimating back taxes allegedly owed by FTX. The recent legal filing, presented to a Delaware bankruptcy court on Sunday, signals a continued escalation in the protracted dispute regarding the substantial unpaid taxes owed by the insolvent exchange and its affiliates to the government.
FTX vehemently disputes the IRS’s claim, asserting that it owes nothing to the tax agency. The IRS, on the other hand, contends that FTX and its affiliated entities owe as much as $24 billion, an amount significantly higher than the estate’s current assets available to satisfy creditors.
Lawyers from crypto exchanges emphasize in the legal document that during its brief three-year existence, FTX never distributed dividends or earnings and incurred substantial losses rather than profits. They argue that FTX never generated income anywhere close to the amounts claimed by the IRS.
In addition, they assert that the tax agency’s reliance on its own processes is merely causing unnecessary delays in compensating the true victims.
The IRS initially asserted a staggering claim of approximately $44 billion in April, which was later amended to $43 billion in September. The most recent figure, $24 billion, is said to cover income taxes, employment taxes, and penalties for the period from 2018 to 2022. However, this amount remains provisional as the IRS continues its audit.
FTX dismisses the IRS claim as “absurd and meritless.” Both FTX and the accounting firm EY have reportedly responded to over 2,300 IRS information requests, providing almost all requested documents, with the remainder set to be delivered by January 15, 2024.
The IRS argues that its estimations should be presumed correct, placing the burden of proof on FTX to demonstrate otherwise. FTX counters this by labeling the IRS’s position as an “Alice in Wonderland argument.”
In its filing, FTX insists on the approval of a proposed schedule to prevent “indefinitely delaying distributions to victims.” The next hearing on the FTX bankruptcy case is scheduled for Wednesday, December 13.
Recent Developments with FTX and FTT Token
FTX, which filed for bankruptcy in November of the previous year, has been embroiled in legal challenges. Its former CEO, Sam Bankman-Fried, was recently convicted of defrauding FTX users and investors on November 2. The outcome of the ongoing legal battle with the IRS holds significant implications for the distribution of FTX’s remaining assets to creditors.
The native token of crypto exchange FTX, FTT token, previously stunned the crypto market with a 285% surge in November. Speculation abounds, attributing the unexpected rally to a potential short squeeze or intentional pumping by speculators. After a year of consolidation, FTT’s sudden breakout, breaking the $3.00 hurdle with high volume, grabbed attention and sparked a rapid price surge. The dynamic move underscores the inherent volatility of cryptocurrency markets.
With a background in journalism, Ritika Sharma has worked with many reputed media firms focusing on general news such as politics and crime. She joined The Coin Republic as a reporter for crypto, and found a great passion for cryptocurrency, Web3, NFTs and other digital assets. She spends a lot of time researching and delving deeper into these concepts around the clock, and is a strong advocate for women in STEM.
