FTX Navigates $24 Billion IRS Claim in Bankruptcy

• FTX navigates $24 billion IRS tax claim, sparking a legal battle with major consequences for both parties and the victims of FTX’s collapse.
• The outcome of this legal dispute will significantly impact the distribution of recovered assets, potentially further harming victims already affected by the FTX scandal.

FTX Navigates $24 Billion IRS Tax Claim Could Threaten FTX’s Recovery & Victims’ Claims

A court hearing on Tuesday will determine how much, if any, of the IRS’s massive demand is legitimate. FTX is pushing for a quick estimate, arguing its three years of operation resulted in losses, negating any substantial tax liability. The company warns that any forced payments would come at the expense of those already harmed by the scandal.

The IRS, however, maintains its ongoing audit justifies the current claim amount and rejects a judge’s intervention as unnecessary. Both sides disagree vehemently, with FTX calling the IRS’s position an “Alice in Wonderland argument” lacking legal basis.

FTX’s $7 Billion Recovery May Not Be Enough

Adding to the complexity, the US government acknowledges the eventual need to adjust the claim, potentially reclassifying some of the debt to a lower priority. Yet, they emphasize their goal of simply determining the true tax liability.

This dispute casts a long shadow over the ongoing effort to untangle FTX’s financial wreckage. Last month, founder Sam Bankman-Fried was convicted of fraud, leading to the company’s bankruptcy and the appointment of restructuring professionals. Since then, they’ve recovered around $7 billion in assets, but the remaining debt burden, including customer funds, remains immense.

The outcome of this legal clash will significantly impact the distribution of recovered assets. Victims of the FTX fraud stand to lose further if the court upholds the current tax claim, highlighting the human cost of this financial disaster.

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