YEREVAN (CoinChapter.com) — In a recent development in the FTX bankruptcy case, the cryptocurrency exchange has requested a Delaware bankruptcy judge to set its tax bill at zero dollars. FTX is challenging the Internal Revenue Service’s (IRS) estimated claims of $24 billion, which it argues are exaggerated and unsupported by evidence. This significant tax claim by the IRS is seen as a potential obstacle to the approval of FTX’s Chapter 11 plan.
IRS Estimate at $24 Billion
FTX asserts that the IRS’s claims are disproportionate to its earnings and potential debt obligations.
The IRS began auditing FTX’s taxes in February 2023 and initially estimated the claims at $44 billion in April, later revising this to $24 billion in November. FTX argues that the IRS’s estimates are baseless and threaten to halt the confirmation of their Chapter 11 plan and delay distributions to creditors and customers.
The IRS claims filed to date nominally total approximately $24 billion—more than fifty times what the debtors ever earned, hundreds of times more than what could plausibly be owed by the debtors, and several times greater than the total distributable value that is currently available to creditors.
said FTX representatives on Nov 29.
According to FTX, their tax returns show no liability and over $11 billion in net taxable losses, contradicting the IRS’s claims. FTX plans to file an amended Chapter 11 plan in mid-December and start soliciting votes in March to confirm the plan by June. (more details below).
Should The IRS Estimate Be Zero?
FTX also said the IRS only recently began auditing FTX affiliate Alameda Research for the 2020 and 2021 tax years.
With potential claims that could exceed a multiple value of the debtors’ estates, this type of protracted process threatens to bring plan confirmation to a screeching halt and indefinitely delay distributions on allowed claims to customers and creditors.
FTX claimed.
This dispute with the IRS over the tax claims is a critical issue in FTX’s ongoing bankruptcy proceedings. FTX bankruptcy proceedings, possibly brought on by Binance exchange meddling, also included statements such as “the IRS claims are facially absurd.”
The exchange representatives also asserted that IRS claims “should be estimated for all purposes at $0.00.”
Q4 News On FTX Bankruptcy Proceedings
As of December 2023, FTX bankruptcy is undergoing several developments. One of them is the amended proposal for creditor repayment. In detail, FTX has proposed an amended plan to return up to 90% of creditor holdings that the exchange held before it collapsed.
The debtors’ group currently handling the FTX bankruptcy process oversees the proposal. They aim to formally file this plan with a US bankruptcy court for review by Dec. 16, 2023. The plan divides missing customer assets into FTX.com customers, FTX.US customers, and a “General Pool” of other assets.
Customers with a preference settlement amount of less than $250,000 can accept the settlement without any reduction in claim or payment.
Restart of the Exchange for International Customers
The exchange is considering restarting its platform for non-US customers. In detail, the FTX bankruptcy administrators have filed a plan for a possible restart of FTX.com, exclusively for offshore customers.
This proposal included the organization of creditors into different classes. One class will potentially restart the FTX exchange with third-party investors. The plan suggests that instead of a cash payout, debtors could receive non-cash consideration like equity securities, tokens, or other interests in the new offshore exchange company.
Notably, the proposed restructuring plan excludes any allowances for FTT token holders. Following a complaint by the SEC in December, which labeled the token security, the agency decided that holders of FTT claims would not receive any distributions and canceled, released, and extinguished all FTT claims after the plan’s effective date.
