FTX Challenges IRS with 'Tax Wonderland Showdown'

Amidst a tumultuous legal battle, FTX, the cryptocurrency exchange grappling with adversity, vehemently opposed the U.S. government's aggressive pursuit of a staggering $24 billion in purported unpaid taxes. In a recent court filing, the exchange asserted that the origin of this formidable claim lies in a dubious attempt to extract funds from the very victims of FTX's tumultuous saga. The document, filed on a somber Sunday, not only contested the specified amount but also contended that there exist no alternative sources of cash. The specter of minimal restitution looms large for victims of the FTX fraud unless the court decides to rebuff the demands of the Internal Revenue Service (IRS). The impending case is set for a critical hearing scheduled for later this Tuesday.

The filing did not mince words in its critique of the IRS's position, characterizing it as an "Alice in Wonderland argument" bereft of any legal foundation. It boldly asserted that the IRS's baseless contentions, suggesting that FTX owes a debt far surpassing any income ever generated by the exchange, would effectively thwart the aspirations of most creditors – themselves victims of the fraudulent activities – from securing any meaningful recovery.

In response to the Debtors' proposed plan for estimating IRS claims, the U.S. clarified its intentions last week, emphasizing a pursuit of fairness rather than a windfall. The objective is to precisely determine the extent of tax liabilities. FTX, which sought refuge in bankruptcy proceedings in November of the preceding year, spurred by heightened scrutiny triggered by a report from Bitsday, did not contest the court's authority to determine its debt to the IRS. However, it vehemently objected to the government's proposed procedural approach, contending that it would unduly protract the administration of the case.v

Compounding FTX's challenges, founder Bankman-Fried faced a significant setback as he was found guilty on seven counts of fraud and conspiracy linked to the operations of the exchange. This verdict, delivered on November 2, 2023, followed a chain of events set in motion by the aforementioned Bitsday report. The founder's sentencing is now anticipated in February 2024, casting a shadow over the future trajectory of FTX amidst the legal and financial turbulence it currently navigates.

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