In a shocking turn of events, the FTX Group’s bankruptcy case has suffered a serious blow: The U.S. Internal Revenue Service has filed claims against the debtor company that dwarf all previous ones. The staggering amount of these claims, amounting to about $44 billion, has cast serious doubt on FTX’s plans to resume operations.
Unpaid taxes are accumulating
FTX Group’s creditors were previously owed a total of $8 billion, with the 50 largest creditors owed $3 billion. However, the IRS has filed 45 lawsuits against FTX companies, increasing the total debt to over $44 billion. This development has put the company’s future in jeopardy.
Unpaid employment taxes are taxed on the culprit
The website of Kroll, the restructuring company, has a full list of claims. The largest claim is worth an astronomical $20.4 billion, followed by another for more than $7 billion and two more for more than $2 billion each. The remaining 41 claims add another $13 billion to the total.
While there is no exact breakdown of tax returns for most of these lawsuits, the leaked documents for the largest one refer to unpaid employment taxes by employers. The IRS investigation reclassified FTX Group personnel as employees rather than contractors, resulting in huge tax bills.
The government has a priority
FTX Group’s total indebtedness to the U.S. government is significantly higher than its indebtedness to business and ordinary investors. Unfortunately, under U.S. law, any unsecured creditors’ claims can only be offset after the debt to the U.S. government is paid.
This tax claim will take priority over FTX’s claim, and Uncle Sam has priority over unsecured creditors, meaning that this huge $20 billion tax bill must be paid off before money starts flowing from Alameda to FTX Intl.
The future is in limbo
So far, these claims have not been discussed in court, at least not publicly. It remains to be seen how IRS lawyers will choose to defend these claims, given the high profile of the case. However, this development casts serious doubt on the future of FTX and its ability to emerge from bankruptcy.