In an unexpected turn of events, the FTX Group’s bankruptcy case has taken a significant hit, as the IRS has lodged claims against the defaulting entity, surpassing all previous claims and casting doubt on the possibility of re-opening for business.
Over $40 Billion in Unpaid Taxes
To put this into perspective, in January, it was believed that FTX’s fifty biggest creditors were owed a total of $3 billion. Although FTX owed creditors over $8 billion, it could have been manageable for the company with its good investments. However, the IRS put a stop to these assumptions when it filed 45 claims against FTX’s entities valued at approximately $44 billion.
Unpaid Employment Taxes
Kroll’s restructuring firm website has the list of claims, revealing that the largest claim amount is a staggering $20.4 billion, followed by another $7 billion, and two each worth over $2 billion. The rest of the 41 claims sum up the total to $13 billion.
While the exact details for most of the claims are unknown, the biggest one leaked online and seems to be targeting unpaid employer-side employment taxes.
The insane Alameda Research LLC tax bill circulating is real. The major balances don’t have detail, but in part it appears the IRS went back and reclassified ALL employees from contractors to employees and hit them for unpaid employer-side employment taxes. pic.twitter.com/GuY6czcgMn
— Meat (🥩,🥩) (@MeatTC_) May 10, 2023
It appears that the IRS’s reclassification of FTX personnel from contractors to employees following an investigation has resulted in a massive tax bill.
The amount now owed by FTX to the U.S. Government is exponentially higher than what is owed to businesses and everyday investors. This presents a problem since, in line with U.S. legal precedent, unsecured creditor claims can only be compensated once the government receives its payment.
“The problem with this annoying tax bill isn’t just the fact that there is now another massive creditor of Alameda (which would reduce FTX’s pro rata share of Alameda’s estate). The problem is that this tax claim would have priority over FTX’s claim. under the US bankruptcy code, Uncle Sam has priority over unsecured creditors, which means this massive 20bn tax bill needs to be paid off before any money can even flow from Alameda to FTX Intl.”
For now, there is no public information on these claims being discussed or challenged in court, and it remains to be seen how the IRS’s legal team will proceed with this matter, given its high-profile nature.