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In a recent development surrounding the FTX bankruptcy case, the company’s lawyers have put forth a strong challenge to the Internal Revenue Service (IRS). They are demanding clarity on how the IRS arrived at its $24 billion tax claim against the now-defunct cryptocurrency exchange. This dispute has added a new layer of complexity to FTX’s ongoing bankruptcy proceedings.
A Sharp Decline in Claimed Amount
The IRS, which initially filed for $44 billion in April, has seen its claim fluctuate significantly over the past few months. Moreover, by September, the amount was adjusted to $43 billion. In addition, in November, it was further reduced to $24 billion. Despite these adjustments, FTX’s stance remains firm since they argue that they owe nothing to the IRS, citing their history of financial losses and the absence of distributed dividends or earnings.
The IRS’s claim, if upheld, could significantly impact the funds available for distribution to FTX’s creditors. The exchange’s legal team is pushing back against what they describe as an “absurd and meritless” claim. They emphasize that any recovery by the IRS would directly diminish the potential payouts to the victims of the exchange’s collapse.
FTX’s Counterarguments
FTX’s legal representatives have responded to the IRS’s inquiries, addressing over 2,300 information requests and providing the most requested documents. They criticize the IRS’s approach as overly presumptive and lacking concrete evidence. The exchange calls for a more reasonable and expedited resolution process to facilitate quicker distributions to its creditors.
With a critical hearing scheduled for December 13, the FTX bankruptcy case is at a pivotal juncture. The exchange, which declared bankruptcy last November following a series of financial missteps by its former CEO, Sam Bankman-Fried, is caught in a challenging situation. As it navigates through these legal complexities, the primary concern remains the fair and timely restitution to its numerous creditors and stakeholders.
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