Currently, IRS is FTX Group’s largest creditor, claiming more than $40 billion in unpaid taxes.
In a stunning development in the long-running bankruptcy case of FTX Group, the IRS has filed claims against the default entity that dwarf any prior ones and cast doubt on its previous notion to reopen.
A total of $40 billion in unpaid taxes
This development should be placed into perspective, as the 50 largest creditors of FTX were believed to owe about $3 billion cumulatively as recently as January. Although total liabilities to creditors amounted to more than $8 billion, this would have been quite manageable for a company that still had some good investments in its portfolio.
However, all of this was recently undone when IRS filed 45 lawsuits against FTX Group companies totaling about $44 billion.
Unpaid payroll taxes
The full list of claims was published on the website of the restructuring firm Kroll. The largest claim is a surprising $20.4 billion, followed by another claim worth more than $7 billion and two lawsuits worth more than $2 billion each. The remaining 41 claims round out the total by another $13 billion.
Although the exact breakdown of tax returns for most of these claims is not available, a leaked document is circulating on the Internet showing the largest of these claims, apparently targeting unpaid employer payroll taxes.
It appears that after an investigation, the IRS classified FTX Group employees as workers rather than contractors, resulting in a massive tax bill.
The sheer amount that FTX Group now owes the U.S. government far exceeds the amount that corporations and ordinary investors have to pay. The problem is that under U.S. law, claims by unsecured creditors cannot be satisfied until after the U.S. government has been paid.
“The problem with this vexing tax bill is not just the fact that there is now another massive creditor to Alameda (which would reduce FTX’s pro rata share of Alameda assets).
The issue is that this tax claim would have importance over FTX’s claim. Under U.S. bankruptcy law, Uncle Sam has priority over unsecured creditors, which means that this huge tax claim of 20 billion euros must be settled before any money at all can flow from Alameda to FTX Intl”
So far, these claims have not been discussed in court, at least not publicly. It remains to be seen how IRS’s lawyers will pursue these claims, given the high public profile of the court proceedings.