IRS claims FTX owes $24 billion in taxes, customer funds at risk?

According to a report from The Block, the U.S. Internal Revenue Service (IRS) claims that FTX owes up to $24 billion in unpaid taxes. FTX's lawyers have requested the IRS to disclose its calculation method to the bankruptcy court. As of the report in mid-September, the total amount of claims filed by customers is $16 billion, while FTX still faces a $9 billion shortfall in compensation funds.

IRS Demands Taxes Far Exceed FTX's Existing Funds

In a new filing submitted to the Delaware bankruptcy court on Sunday, lawyers for FTX stated that the U.S. Internal Revenue Service (IRS) must substantiate its claims against FTX and explain how it arrived at its estimated tax bill.

FTX claims it does not owe any debts to the IRS, but the IRS is demanding as much as $24 billion in taxes.

According to reports from mid-October, FTX still has a $9 billion shortfall in compensation funds, and information provided by bankruptcy handling firm Kroll 9/11 shows that a total of 36,075 users on both the FTX.com and FTX US platforms have filed claims totaling up to $16 billion. Does this mean:

If FTX pays $24 billion in taxes, will there be no money left to compensate claimants?

The lawyers wrote in the filing that FTX has never distributed dividends or earnings and has "never received anywhere near an amount that could support the IRS's $24 billion tax claim." Instead, FTX has lost significant funds.

The only source the IRS has for recovery is taking compensation funds from victims. By pursuing tax claims against debtors without grounds, the IRS's actions will only delay the distribution of compensation to those truly harmed.

IRS States: Revised Down from $44 Billion to $24 Billion

According to The Block, the IRS initially filed a claim for around $44 billion in April, revised it to $43 billion in September, and has now reduced it to $24 billion in November.

The U.S. Internal Revenue Service stated that the owed $24 billion is related to income taxes, employment taxes, and penalties owed by FTX and its affiliates from 2018 to 2022. This is not the final figure as the IRS continues its audit.

FTX disputes this claim, stating that both FTX and Ernst & Young have responded to over 2,300 IRS information requests and provided the requested documents, with only a few to be submitted by January 15, 2024.

In a filing submitted yesterday, FTX firmly insists that their proposed timeline must be approved to avoid "indefinitely delaying the distribution of funds to victims." The next hearing for the FTX bankruptcy case is scheduled for Wednesday, December 13th.