FTX has challenged the IRS on its $24 billion tax bill claims, arguing that the agency’s “unexplained” tax debt would heavily affect its customer fund recovery efforts, potentially diverting funds away from FTX victims.
FTX Lawyers Alarm Over IRS Impact on Refunds
A new development to the ongoing legal battle between failed crypto exchange, FTX and the United States International Revenue Service (IRS) has put a damper on its recovery efforts. In a recent Delaware Court filing, the exchange submitted a reply to its previous motion to dismiss the IRS’s $24 billion tax claims.
In its objection against the IRS tax bill, FTX lawyers provided a series of detailed explanations as to why the tax claims were “unsubstantiated.” FTX debtors cited that the failed exchange in its brief three years of operation has incurred significant losses amounting to billions of dollars. Moreover, the exchange revealed that it had never generated profits or funds substantial enough to support the considerable tax bill submitted by the IRS.
Earlier in October, FTX had announced its commitment to refunding about 90% of the missing funds to victims of the FTX fraud. The insolvent exchange has stated that the IRS aims to collect the only source of funds to compensate FTX victims.
“There is simply no basis to support the IRS meritless claims that the Debtors owe tax in an amount that is orders of magnitude greater than any income the Debtors ever earned and that would effectively prevent most of FTX’s creditors themselves victims of fraud- from obtaining any meaningful recovery,” the crypto exchange said in the filing. “It just makes no sense that a company that lost many billions of dollars would have a substantial tax liability, much less one for $24 billion.”
Additionally, the crypto exchange has emphasized the lack of transparency regarding the IRS’s tax bill. FTX debtors disclosed that the IRS has failed to provide appropriate documentation to substantiate or defend its tax claims. As a result, the exchange concluded that the tax bill claims “are not readily ascertainable and as such “are not subject to estimation at all.”
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IRS Fires Off Arguments For Its Claims
The United States Department of Treasury has responded to FTX’s objections, providing reasons why its $24 billion tax bill should be considered. The financial regulatory agency disclosed in the filing that due to the IRS’s unsubstantiated claims, the tax bill was applicable for a proper estimation.
The agency has admitted that its $24 billion tax bill was based on speculation. However, the claims should be considered since tax debts were calculated based on the amount of income earned and wages paid by an organization.
“The United States does not seriously contend that the IRS Claims are ‘readily ascertainable.’ Indeed, the United States concedes that Lift is possible that the IRS will, as it already did for 2023, amend the claim to reflect a lower (or even zero) liability for each of the years and entities on the proof of claim,” the filing stated.
It further added that “The vast range of possible valuations asserted by the IRS between $0.00 and $43 billion, with the IRS’s current guess at $24 billion underscores that the value of the IRS Claims is entirely speculative, rendering them ripe for estimation.”
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