IRS Targets FTX While US Chamber of Commerce Backs Coinbase

The taxmen are coming for the estate of Sam Bankman-Fried’s bankrupt FTX crypto exchange.

And they want the collapsed firm and its affiliates to pay up in a big way.

This, as court filings reveal that the United States Department of Treasury and Internal Revenue Service (IRS) have alleged that FTX and its various bankrupt subsidiaries collectively owe around $44 billion to the government in unpaid partnership taxes and payroll taxes.

The 45 separate claims being directed at the corpse of what was once the world’s third-largest cryptocurrency exchange range from just a few thousand dollars to tens of billions.

The single largest claim is one being leveled at Alameda Research LLC, FTX’s former sister trading firm, which also finds itself the subject of a separate liability for $7.9 billion.

Paper Bird Inc., one of the shell companies incorporated and largely or wholly-owned by Bankman-Fried and used to transfer billions in “loans” to himself, is also facing a claim worth nearly $115 million.

There are also two additional claims together totaling $9.5 billion against Alameda Research Holdings Inc., a separate entity from the trading firm’s LLC.

See also: New FTX Report Highlights Importance of Treasury Management

While the tax bills themselves are staggering, the fact that the IRS has designated its claims under administrative priority is the real eye-catching part of the assessment.

This would mean that the IRS has pre-eminence in reclaiming funds over FTX’s unsecured creditors, including more than 1 million rank-and-file retail investors who all lost their hard-earned money to Bankman-Fried and his co-conspirators’ alleged crimes.

Still, the precedence of any competing claims will ultimately be decided by the federal judge overseeing the Delaware Court’s bankruptcy proceedings.

Picking Over the Bones

While Alameda Research, FTX, and many of the exchange’s key affiliates were headquartered outside of the U.S., the organization’s founders and key personnel, including Sam Bankman-Fried and Alameda Research CEO Caroline Ellison, are U.S. nationals.

As a nation, the U.S. uses a taxation-by-citizenship model which means that U.S. nationals are liable for taxes on their worldwide income no matter where they reside or the amount of time they spend on domestic soil per annum.

For partnership entities, taxes are generally passed through to the partners of the enterprise and then taxed at the individual level. That appears to be the situation with the outstanding claims from the IRS, as the agency has reclassified FTX’s employees and levied unpaid employer-side employment taxes against them.

Read more: FTX Lawyers Recover Billions and Bill Millions Investigating Exchange Reboot

As reported by PYMNTS, FTX’s collapse left creditors with $11.6 billion in claims, while current ownership and lawyers for the bankrupt exchange have recovered around $7.3 billion in total assets.

Bankman-Fried, 31, has maintained his innocence in the face of more than a dozen charges being levied against him.

What’s more, beyond professing his innocence, in court documents filed on Monday (May 8), the founder of FTX went so far as to ask a federal judge to dismiss 10 of the 13 charges against him.

The only charges he is not contesting, at least at the moment, are conspiracy to commit commodities fraud, conspiracy to commit securities fraud and conspiracy to commit money laundering.

On Friday (May 12), the alleged fraudster’s lawyers filed a new claim, “on behalf of our client, Samuel Bankman-Fried,” positing that a recent Supreme Court of the United States (SCOTUS) Thursday (May 11) in Ciminelli v. United States invalidating the “right-to-control” theory as a basis for conviction under the federal fraud statutes may result in many of the criminal counts against Bankman-Fried being legally null.

See also: Coinbase CEO Says Retail Investors Remain Committed to Crypto

US Chamber of Commerce Rallies Behind Coinbase in SEC Fight

In other crypto news, the U.S. Chamber of Commerce on Tuesday (May 9) filed an amicus brief throwing its support behind U.S.-based crypto exchange Coinbase in its fight with the U.S. Securities and Exchange Commission (SEC).

“The Chamber’s members have a strong interest in regulatory clarity, and many of its members are companies subject to U.S. securities laws that may be adversely affected by the Securities and Exchange Commission’s current approach to digital assets,” wrote the world’s largest business organization.

“Remarkably, the Securities and Exchange Commission—despite proclaiming itself the primary regulator of digital assets—has refused to resolve this threshold question [around what digital assets are securities],” said the Chamber in its brief, adding that “by eschewing all formal, prospective processes, the SEC has also largely disabled the federal courts from reviewing the extremely contestable legal arguments underlying its expansive claimed authority.”

The SEC’s refusal to resolve Coinbase’s rulemaking petition is “causing substantial economic harm” to Coinbase and the broader business community, argued the brief.

The post IRS Targets FTX While US Chamber of Commerce Backs Coinbase first appeared on PYMNTS.com.