FTX Trading Ltd, the legal name of Sam Bankman-Fried’s collapsed cryptocurrency exchange FTX, is seeking to significantly reduce its tax liabilities to the US Internal Revenue Service.
The move is another part of a months-long saga between the embattled exchange and the state tax collection agency. FTX aims to pay $200 million in priority tax claims and $685 million in subordinate tax claims to the IRS, according to legal documents filed June 3.
FTX debtors, who were in control of the company during the bankruptcy, claim the IRS incorrectly included Sam Bankman-Fried’s embezzled funds and other tax liabilities in its calculations.
“…(T)he Debtors vigorously contest the IRS claims in a number of material respects, including, among other things, Sam Bankman-Fried’s theft of FTX customer funds, his employment, and his income tax liability for so-called ’embezzled income’ resulting from his employment, employment, etc. “It is proposed that large amounts of deductions and losses will be disallowed due to lack of proof and tax liability for compensation purportedly paid to Mr. Bankman-Fried and other former debtors,” according to the filing.
The IRS disagrees with the debtor’s claims and plans to pursue significant tax liabilities if an agreement is not reached. The deadline for filing objections in the case is June 17, and the hearing date is June 25, 2024.
The IRS previously claimed FTX owed $44 billion in taxes, but later reduced that amount to $24 billion. FTX claimed the IRS’s $24 billion tax demand would delay customers getting their money back, The Block previously reported.
Priority tax claims, such as taxes, are claims that must be paid before other debts, while subordinate claims are paid only after higher priority debts are satisfied.
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About the author
MK Manoylov has been a reporter for The Block since 2020, joining just before Bitcoin surpassed $20,000 for the first time. Since then, MK has written nearly 1,000 articles for publications covering all cryptocurrency-related news, preferring NFTs, metaverse, web3 games, fundraising, crime, hacking, and cryptocurrency ecosystem stories. MK holds a graduate degree from New York University’s Science, Health, and Environmental Reporting Program (SHERP) and has also covered health topics for WebMD and Insider. X You can follow MK at @MManoylov and on LinkedIn.