FTX debtors push back against $24B IRS claim

“The only source of recovery is by taking recoveries away from victims,” FTX debtors warned

share

FTX debtors warned that a $24 billion claim by the Internal Revenue Service could slow down the return of customer funds. 

The filing, made on Sunday, further argues that the FTX debtors “never earned anything anywhere near amounts that could support the IRS Claims for $24 billion in taxes.”

Instead, lawyers wrote, debtors for the bankrupt exchange incurred billions in losses.

“These cases present a zero-sum game. The only source of recovery for the IRS is by taking recoveries away from victims. As there is no basis to assert any tax claim against the Debtors, the IRS’s reliance on its own processes only serves to delay distributions to those truly injured,” FTX wrote.

Initially, according to the filing, the IRS alleged claims of $43 billion, but brought that number down by roughly half to get to $24 billion.

FTX’s debtors asserted that the IRS has not provided a basis for its claims, and the US previously said that the IRS’s claims “are not subject to estimation.” 

Read more: Bankman-Fried’s crypto portfolio would be up billions this year — thanks to Solana 

Under that scenario, the burden of responsibility to disprove the claims amount would fall to the FTX debtors, which FTX said would take “many months” to resolve. 

“These cases should not be delayed by an IRS process that is akin to determining whether a shipwreck sits at 1,000 feet or 3,000 feet below sea level. The import is the same — the ship is underwater,” the lawyers wrote. EY recorded the FTX loss at $11 billion, which is apparently reflected on the tax returns.

The FTX debtors have been working with the IRS on the claims, allegedly supplying document requests. The estate argues that “there is no reason to have an additional lengthy fact discovery period to address tax issues the IRS has already been evaluating for many months.”

If the IRS’s claims can be resolved, then the bankruptcy proceedings will be able to move forward. The proposed schedule would set an evidentiary hearing ahead of confirmation in February of next year, where “the parties can brief the issues and present their positions.”

However, if the back and forth continues then the bankruptcy plan will be delayed. The US, the filing said, gave an “eight month estimation schedule” for further IRS investigation.

The bankrupt exchange declared bankruptcy in November of last year. Former CEO Sam Bankman-Fried, who was found guilty of fraud in November of this year, has a sentencing hearing also set for February 2024.


Get the news in your inbox. Explore Blockworks newsletters:

  • Blockworks Daily: The newsletter that helps thousands of investors understand crypto and the markets, by Byron Gilliam.
  • Empire: Start your morning with the top news and analysis to inform your day in crypto.
  • Forward Guidance: Reporting and analysis on the growing intersection of crypto and macroeconomics, policy and finance.
  • 0xResearch: Alpha directly in your inbox. Market highlights, data, degen trade ideas, governance updates, token performance and more.
  • Lightspeed: Built for Solana investors, developers and community members. The latest from one of crypto’s hottest networks.
  • The Drop: For crypto collectors and traders, covering apps, games, memes and more.
  • Supply Shock: Tracking Bitcoin’s rise from internet plaything worth less than a penny to global phenomenon disrupting money as we know it.
Tags

Upcoming Events

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Research Report Templates.jpg

Research

Bluefin possibly stands at an inflection point. The token is near an all-time low yet the protocol’s spot volume market share and derivatives exchange usage have been increasing month over month since its November launch. Given its current market position and the upcoming upgrades (for both Bluefin and SUI), there may be upside potential before the increased supply growth in December. However, strong opposition from existing competitors (like Cetus and Suilend), as well as new entrants (like Aftermath), pose key challenges to Bluefin’s medium-term success.

article-image

Top Committee Democrat Sen. Elizabeth Warren in her opening statement accused Atkins of “helping billionaire CEOs like Sam Bankman-Fried”

article-image

Introducing garbled circuits for enhanced privacy and regulatory compliance

article-image

Ross Ulbricht was a freedom maximalist building freedom tech, powered by Bitcoin

article-image

Solana validators can reap benefits including payments, votes and community clout

article-image

Sponsored

WalletConnect is cementing itself as the essential connectivity layer, ensuring wallets remain the entry point for billions of users

article-image

According to a legal filing, Galaxy Digital helped boost the price of LUNA while quietly selling its tokens