FTX: Up to $5B in US Government Claims Unveiled Amid Bankruptcy Proceedings


The embattled FTX estate is currently caught up in a complex web of legal obstacles as it maneuvers through bankruptcy proceedings. This is as looming U.S. government assertions cast a shadow over its future.

Per a court filing spotted by The Block, a recent court filing revealed the enormity of these assertions, projected to range from $3 to $5 billion, pending ongoing discussions and potential modifications with pertinent authorities.

Prioritization Structure in FTX Bankruptcy Proceedings

In the submission made to the United States District Court for the Southern District of New York, the ambiguous sum of U.S. tax liabilities is indicative of the financial challenges that the insolvent cryptocurrency exchange is facing. Despite this, the court filing reveals a prioritization structure consistent with Chapter 11 regulations, which details the order of payments preceding resolutions with government bodies.

In order of priority, FTX customers, Alameda Research lenders, administrative expenses, and non-governmental creditor claims will take precedence over government and tax claims in the distribution of remaining proceeds from the estate.

The proposal includes earmarking 100% of the “SNDY Remission Proceeds” for distributions to FTX.com customers and Alameda lenders, with a portion allocated for a settlement with BlockFi, pending court approval. This will happen in spite of some expert opinions that Alameda was destined for collapse before the FTX issue.

After settling administrative and non-governmental creditor claims, a portion of the distributable value, capped at 25%, will be reserved for satisfying U.S. Federal income tax claims. The rest will be set aside for resolving disputes with entities like the Commodity Futures Trading Commission and other governmental bodies.

FTX Financial Responsibilities

In January 2024, the FTX estate restated its commitment to completely compensating its clients in resolving financial obligations stemming from the bankruptcy. This decision followed the sale of more than $1 billion worth of its shares in Anthropic, an artificial intelligence company.

The complex financial situation is worsened by discrepancies in stated tax obligations. Initially, the U.S. Internal Revenue Service stated that outstanding taxes which amounted to $44 billion. However, it subsequently adjusted the figure to $24 billion. This further complicates reconciling financial responsibilities amid the bankruptcy proceedings.

FTX Financial Challenges and Future Prospects

Amidst the legal disputes, FTX estate had stated it retrieved around $7 billion in assets as of September 2023, which could potentially appreciate amidst a resurgence in the crypto bull market. FTX has been proactively divesting certain digital assets to tackle its liquidity issues, resulting in $1.8 billion in revenue as of December 8, 2023.

However, the recovery of unpaid taxes and the resolution of outstanding claims remains uncertain, casting a shadow over the estate’s financial future.  The fallout from FTX’s collapse reverberates through the crypto industry and it is made worse by the guilty verdict of its ex-CEO, Sam Bankman-Fried, for defrauding both users and investors.

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