Once SBF stepped down, the new leadership of FTX scoured the bankrupt exchange’s databases, looking for misplaced and poorly labeled assets.
Months later, John J Ray III and his team have managed to map out about $7 billion in assets, nearly half of which are in cryptocurrencies.
The IRS Wants Its Share
However, the new team at FTX isn’t the only one taking a closer look at the notoriously mismanaged finances – the taxman has been on the case as well. Furthermore, the IRS – who have already submitted two revisions to the original claim – state that the tax audit is still in progress, and the full figure owed is subject to change.
Originally, the IRS claimed that FTX owed a whopping $44 billion. This amount was eventually amended all the way down to $24 billion spread across all entities in the FTX empire.
The lion’s share of the allegedly unpaid taxes pertains to unpaid partnership taxes – in quantum of $20.4 billion – with payroll and other income tax obligations making up the remaining amount.
FTX originally attempted to have the entire claim dismissed late last month, arguing that the tax bill is a pie-in-the-sky figure that far surpasses its earnings. Furthermore, tax returns filed by Ernst & Young on behalf of the FTX Group were also dismissed by the IRS.
The original dismissal attempt was, understandably, rejected by the court.
FTX has now filed a second document, stating that not only are the figures incorrect, but that they would also effectively ensure its creditors would pretty much never see a red cent returned to them.
“This Alice in Wonderland argument has no support in the law. Just like any other claimant in a Chapter 11 bankruptcy, the IRS must provide a specific basis for its claims, with supporting documentation[…]. The Debtors are not expected to disprove that an office equipment vendor who says it provided an unspecified number of desk chairs is owed $24 billion, and the same is true for a supposedly massive tax liability that no one (including the IRS) can explain or support.”
The IRS and FTX will face off in court today, the 12th of December. It’s worth noting that FTX appears to no longer be gunning for a complete dismissal.
Instead, the exchange hopes for a more accurate – or at least better documented – figure filed by the U.S. tax regulator. The current figure, FTX lawyers argue, is “orders of magnitude greater” than the income the now-bankrupt crypto platform ever earned.