FTX is preparing to challenge the IRS's $24 billion tax demand in court today, a move that could jeopardize the cryptocurrency exchange's recovery and victims' claims.
FTX attorneys said the IRS needs to substantiate its claim against the cryptocurrency exchange as well as disclose the system it used to determine the amount of unpaid taxes.
However, FTX points out that its three years of operation have resulted in losses that negate any significant tax liability. The exchange also warns that any forced payments will come at the expense of those already affected by its collapse in 2022. Still, $24 billion is three times the amount the company is currently trying to repay creditors, The Block reported.
"The only source of tax refunds for the IRS is to take money from victims. Because there is no basis for tax claims against debtors, the IRS's reliance on its own processes only delays payments to those who are truly harmed," the attorneys argue.
The IRS, meanwhile, argues that its audit justifies the current amount of the claim and does not require a judge's intervention.
In April, the IRS claimed about $44 billion for FTX, then lowered it to $43 billion in September and $24 billion in November.
While the audits continue, the IRS said that at this point, the $24 billion includes income taxes, employment taxes, and penalties from 2018 to 2022.
FTX called such a statement "absurd and unfounded," since the company has provided all the documents requested by the IRS, except those that will be provided by January 15, 2024.
Recall that FTX filed for bankruptcy in November 2022. Former CEO Sam Bankman-Fried was found guilty of defrauding FTX users and investors on November 2.
It's worth noting that this trial is the latest in a months-long dispute between the IRS and FTX over how much the bankrupt exchange and its subsidiaries owe the government in unpaid taxes.
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