FTX Disputes IRS’s ‘Alice in Wonderland’ Tax Claim

The U.S. government’s claim for $24 billion in unpaid taxes from FTX has only one source – taking cash away from its victims, the bankrupt crypto exchange said in a court filing Sunday.

The filing disputed the amount claimed and also said there are no other sources of cash. Unless a judge rejects the Internal Revenue Service’s demand, the victims of the FTX fraud will not get any meaningful recovery. The case is scheduled to be heard later Tuesday.

“This Alice in Wonderland argument has no support in the law,” the filing said. “There is simply no basis to support the IRS’s 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.”

In its objection to the Debtors’ proposed plan to estimate IRS claims last week, the U.S. did say it is “not looking for windfall, only to determine the correct amount of the tax liabilities.”

FTX filed for bankruptcy in November last year after a chain of events triggered by a CoinDesk report that raised questions about its finances. On Nov. 2, 2023, a jury found FTX founder Bankman-Fried guilty of seven counts of fraud and conspiracy tied to the exchange’s operation. His sentencing is expected in February 2024.

FTX didn’t dispute that the Court “can and should determine the amount (if any) owed by the Debtors to the IRS” but that the government’s proposal for the determination process “would unduly delay the administration of the case.”