- L Higgins and S Pettigrove
ALL THE MONEY! IRS sends FTX/Alameda group UD$44bn tax bill
The bankrupt cryptocurrency exchange FTX and its affiliates have been hit with 45 claims totaling USD$44 billion by the United States Department of Treasury and Internal Revenue Service (IRS).
On May 10, an alleged tax bill for FTX's sister company, Alameda Research LLC, surfaced online. The bill showed that the IRS had assessed the company for USD$20.4 billion in partnership and payroll taxes, which appears to correspond to one IRS claim found on the website of Kroll's Restructuring Administration practice, the claims agent for the Chapter 11 debtors which comprise some 100 entities in the FTX/Alameda group.
The IRS has also filed claims against sister entities, Alameda Research LLC for USD$7.9 billion, and Alameda Research Holdings for USD$7.5 billion and USD$2.0 billion under the "administrative priority" classification. This classification allows the agency's claims to override those of unsecured creditors during bankruptcy proceedings, thus giving the IRS priority of collection. According to reports, for the U.S. partnership entities, taxes are not paid at the partnership level but are instead passed through to their partners and taxed at the individual level.
The IRS filings also include claims against FTX Trading Limited, the operator of the FTX exchange platform, totaling USD$64million, of which USD$24.8 million is said to have "administrative priority" and a further USD$40 million having priority status.
Although Alameda Research was based in Hong Kong, its founders and key personnel, including Sam Bankman-Fried and Caroline Ellison, are U.S. citizens. The U.S. taxation system is based on citizenship, meaning that Americans are liable for taxes on their global income regardless of where they reside or how much time they spend in the U.S. each year. This contrasts with many other countries including Australia where tax liabilities may differ depending on residency status.
In April, US bankruptcy advisors revealed that FTX had recovered USD$7.3 billion in assets and would consider rebooting the exchange as part of a restructuring plan. However, this was before the IRS' immense claims which would impact the recovery for creditors of both Alameda and FTX Trading, given the vast sums owing to it from Alameda. At the time, FTX's liabilities to customers alone nevertheless exceeded recovered assets by over USD$8 billion.
The IRS's substantial claim will came as a significant shock to creditors of the Chapter 11 debtor entities and, given the assertion of priority status in respect of a large amount of those claims, it will no doubt be the subject of further scrutiny by the group's aggrieved creditors and customers.