FTX, the bankrupt cryptocurrency exchange, has challenged the Internal Revenue Service (IRS) to justify its demand for $24 billion in unpaid taxes and penalties. The exchange’s lawyers filed a new document on Sunday to a Delaware bankruptcy court, accusing the IRS of delaying the recovery of user funds.
FTX claims it owes nothing to the IRS, as it never distributed dividends or earnings during its three-year operation. The lawyers wrote that the exchange “never earned anything near amounts that could support the IRS claims for $24 billion in taxes.” On the contrary, they said the exchange lost huge money.
The document also argued that the IRS’s claim would only harm the victims of FTX’s collapse, as it would reduce the amount of money available to pay back the creditors.
“The only source of recovery for the IRS is by taking recoveries away from victims. As there is no basis to assert any tax claim against the Debtors, the IRS’s reliance on its own processes only serves to delay distributions to those truly injured,” the lawyers stated.
FTX’s Battle Against IRS Over $24 Billion
The IRS first filed its claim against FTX and its affiliates in April, demanding approximately $44 billion in income taxes, employment taxes, and penalties for the years 2018 to 2022. The IRS later revised its claim to $43 billion in September and then to $24 billion in November. The IRS said it is still conducting an audit, and the final figure may change.
FTX called the IRS’s claim “absurd and meritless.” The exchange and its auditor, EY, said they have cooperated with the IRS and provided almost all the documents requested, except for some that will be delivered by Jan. 15, 2024.
The IRS, however, maintains that its estimations are correct and that FTX has the burden of proof to show otherwise. The exchange dismissed the IRS’s argument as an “Alice in Wonderland argument.”
In its latest filing, the exchange urged the court to approve its proposed schedule for resolving the IRS’s claim, as it would avoid “indefinitely delaying distributions to victims.” The next hearing for the FTX bankruptcy case is set to take place on Wednesday, December 13th.
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