FTX battles IRS in court over $24 billion tax dispute

abdelaziz Fathi

The conflict between the U.S. Internal Revenue Service (IRS) and the bankrupt crypto firm FTX Trading Ltd. has intensified, with FTX challenging the IRS’s demand for $24 billion in unpaid taxes.

FTX argued in a recent court filing that unless a judge dismisses this claim, the hefty tax demand could deplete funds meant for the victims of the firm’s fraud.

Scheduled for a court hearing on Wednesday, the two parties are set to debate the legitimacy of the IRS’s claim and the appropriate procedures to assess the owed amount. FTX is pushing for a swift process to estimate the claim, while the IRS argues that its ongoing audit makes such an estimation premature.

In the filing to a Delaware bankruptcy court, FTX’s lawyers insist that the IRS should substantiate its claim and clarify how it calculated the alleged back taxes from 2018 to 2022. The IRS initially claimed around $44 billion in April, later amending it to $43 billion in September and then reducing it to $24 billion in November. This sum includes income taxes, employment taxes, and penalties purportedly owed by FTX and its affiliates.

FTX’s attorneys contested the IRS’s claims, stating that during its three-year existence, FTX neither distributed dividends nor earnings that could justify the $24 billion tax demand. They highlighted that FTX, in fact, incurred substantial losses. The company termed the IRS’s claim as “absurd and meritless,” noting their compliance with over 2,300 IRS information requests and provision of almost all requested documents.

The IRS claims that its tax estimations are presumed correct, placing the onus on FTX to prove otherwise—a stance FTX criticized as an “Alice in Wonderland argument.” The crypto firm insists on a timeline for resolving the tax dispute, arguing that any delay in this matter could indefinitely postpone compensation to the victims of its bankruptcy.

FTX filed for bankruptcy in November, following the conviction of its former CEO, Sam Bankman-Fried, for defrauding FTX users and investors on November 2.

  • Read this next

    Retail FX

    Lark Funding reopens to US traders, MyFundedFX picks cTrader

    Canada-based prop trading firm Lark Funding announced it will once again welcome clients from the United States.

    Institutional FX

    Cboe FX volume falls to lowest level since summer

    Cboe’s institutional spot FX platform, known as Cboe Spot, today announced its trading volume for the month ending February 2024, which took a step back after a strong rebound in December.

    Retail FX

    ThinkMarkets secures lucrative DFSA license in Dubai

    Melbourne-based broker ThinkMarkets has secured a license from the Dubai Financial Services Authority (DFSA) after it has already incorporated its new subsidiary in the Dubai International Financial Center (DIFC).

    Digital Assets

    New Horizen Lays Out Its Vision Of A Modular, Proof Verification Layer For Web3 Networks

    Horizen is forging a new path for the future of blockchain with its New Horizen initiative, which is building a modular Proof Verification layer that’s dedicated to verifying cryptographic proofs for any settlement layer, beginning with Ethereum. 

    Digital Assets

    Karma3 Labs Raises a $4.5M Seed Round Led By Galaxy and IDEO CoLab to Build OpenRank, a Decentralized Reputation Protocol

    Using OpenRank, developers and web3 companies can build consumer apps where people can discover, use, fund, read, or buy something on-chain without worrying about getting spammed or scammed.

    Digital Assets

    Worldcoin down as Elon Musk sues OpenAI CEO Sam Altman

    Worldcoin’s (WLD) token dropped following news of a lawsuit against related company OpenAI. The lawsuit was filed by Elon Musk and accused OpenAI and CEO Sam Altman of breach of contract.

    Institutional FX

    Exegy’s Liquidity Lamp adds intraday data to outperform S&P 500 by 31.8%

    Exegy has incorporated intraday signals into its AI-powered iceberg order detection tool, Liquidity Lamp. By adding intraday data to a baseline mean reversion strategy, Exegy’s model outperformed the baseline by 10.5% and the S&P 500 (SPY) by 31.8%, respectively in the out-of-sample testing.

    Industry News

    Think Elon Musk backed your crypto exchange? ASIC’s latest reveal may shock you

    In an absolutely shocking turn of events that nobody could have possibly seen coming, the Australian Securities and Investments Commission (ASIC) has bravely stepped forward to reveal that, yes, those videos of Elon Musk passionately endorsing a cryptocurrency exchange are as fake as a three-dollar bill.

    Fundamental Analysis

    Global FX Market Summary: EUR, USD March 1st, 2024

    The ISM’s February Manufacturing PMI is expected to show a slight increase, but remain below the expansionary threshold, while inflationary pressures persist and a Fed rate cut in June is still possible.