FTX Trading Ltd. asked a bankruptcy court to dismiss $24 billion in estimated claims brought by the Internal Revenue Service, arguing the government has failed to provide “any rational basis” for the figure.
The tax claims lodged by the IRS have gone “unexplained” for months and “threaten to halt the Debtors’ progress and any distribution to customers and other creditors indefinitely,” FTX told the US Bankruptcy Court for the District of Delaware in court papers Wednesday. The motion comes as FTX’s advisers work to recover billions of dollars in transfers made before the company filed for bankruptcy.
The fallen cryptocurrency exchange asked the court to value the tax claims at zero, or an amount determined at trial. Otherwise, most—or potentially all—of the estate’s assets would have to be reserved for IRS claims, the company said.
“These unsubstantiated ‘placeholder’ claims grossly speculate as to the Debtors’ theoretical prepetition tax liabilities and bear no relation to reality,” FTX told the court.
Robert Marvin, an IRS spokesman, said the IRS does not comment on pending litigation.
The IRS has filed 47 pending claims against FTX that estimate its total tax liability to be about $24 billion, according to Wednesday’s filing. Meanwhile, FTX’s own advisers say the company not only has no tax liability, but that it has more than $11 billion in net taxable losses, it said.
FTX proposed that the court hold a claims estimation trial on Feb. 27, saying that such a truncated timeline is possible because it’s already responded to about 1,100 information requests from IRS audit teams.
“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 said.
While IRS documents against FTX are relatively bare of details, the claims allege the company owes a wide range of taxes that include unemployment, payroll withholding, income, and partnership.
At least 36,000 customer claims have been brought against FTX, and more than 2,300 non-customers have filed claims asserting they’re owed about $40 billion, according to declaration filed by FTX adviser Edgar W. Mosley II, a managing director at Alvarez & Marsal North America LLC. The IRS claims are about half of all non-customer claims, Mosley said.
FTX has so far has paid out more than $351 million to professionals through October, and had about $2.6 billion in total cash in its bank accounts as of Oct. 31, according to a financial update filed with the court Thursday.
The case is FTX Trading Ltd., Bankr. D. Del., No. 22-11068, motion 11/29/23.