FTX Asks Court to Scrap $24 Billion Tax Bill

Reading Time: 2 minutes
  • FTX has vigorously contested the IRS’s $24 billion tax claims, which has been reduced from $44 billion
  • The bankrupt exchange highlighted the absence of a rational basis and the potential disruption to ongoing asset distribution processes
  • FTX has urged the bankruptcy court to either value the tax claims at zero or determine an appropriate amount through a trial

FTX has contested $24 billion in tax claims brought by the Internal Revenue Service (IRS), emphasizing the absence of a rational basis for the figure and the potential disruption it poses to ongoing asset distribution processes. The bankrupt exchange asserts that the IRS claims, which have remained unexplained for months, lack substance and are speculative, characterizing them as “placeholder” figures. In response, FTX urges the US Bankruptcy Court for the District of Delaware to either value the tax claims at zero or determine an appropriate amount through a trial, expressing concern that complying with the IRS’s demands could halt the progress of debtors and impede distributions to customers and other creditors indefinitely.

$44 Billion Tax Bill Reduced

The IRS filed an astonishing $44 billion tax demand with FTX and its associated companies in April, some 4.4x the value of the assets the company had recovered at the time. This, however, seems to have been revised down in the intervening months, leaving FTX to face a $24 billion tax bill instead.

However, understandably, FTX has filed a motion to dismiss the 47 claims that make up the charge, with the company insisting that the IRS has failed to provide a credible basis for its claims and asserting that the unverified and speculative figures could lead to an unjust reservation of most, if not all, of the estate’s assets for IRS claims. The company says that not only has it no tax liability but it in fact possesses more than $11 billion in net taxable losses.

Erasure or Trial, Says FTX

FTX proposes a claims estimation trial on February 27, aiming to expedite the resolution of the contentious tax claims and highlighting its responsiveness to over 1,100 information requests from IRS audit teams which facilitated a swift claims estimation process. FTX emphasizes the urgency of a timely resolution, expressing concerns that a protracted legal process could result in indefinite delays in distributing funds to allowed claims from customers and creditors.

FTX also faces a substantial number of customer claims, with over 36,000 submitted, and an additional 2,300 non-customer claims asserting owed amounts totaling approximately $40 billion. Despite financial pressures, FTX disbursed over $351 million to professionals through October, maintaining approximately $2.6 billion in total cash reserves as of October 31.