The United States Department of Treasury and Internal Revenue Service (IRS) have recently filed an astonishing 45 claims amounting to $44 billion against the beleaguered cryptocurrency exchange FTX and its subsidiaries. These claims seem to be related to tax liabilities for FTX’s sister company Alameda Research LLC, with documentation circulating online on May 10th indicating that the IRS assessed the company $20.4 billion.
The IRS reportedly assessed Alameda Research LLC for partnership taxes and payroll taxes. This information is seemingly consistent with the claim found on the website of Kroll Restructuring Administration, acting as FTX’s claims agent. The IRS is further demanding $7.9 billion from Alameda Research LLC itself, accompanied by an additional two claims amounting to $7.5 billion and $2.0 billion against Alameda Research Holdings.
Under the classification of Admin Priority, the IRS claims will take precedence over lower-level creditors during bankruptcy proceedings. This poses a curious point for discussion, as Alameda Research is headquartered in Hong Kong, yet its founders, including key personnel such as Sam Bankman-Fried and Caroline Ellison, are U.S. nationals.
The United States utilizes a taxation-by-citizenship regime, which means that its nationals are liable for taxes on their worldwide income, irrespective of where they reside or how much time they spend in the country annually. For partnership entities, taxes are passed through their partners and taxed at the individual level, rather than being paid at the partnership level.
This series of events follows a report by Cointelegraph in April stating that FTX had recovered $7.3 billion in assets, considering relaunching the exchange in 2023. This announcement, however, was made before the IRS’ claims came to light, and FTX’s liabilities still exceeded its assets by an estimated $8.7 billion at that time.
Taking into consideration the substantial claims made by the IRS, it is interesting to pose the question: should crypto enthusiasts maintain trust in cryptocurrency exchanges after the collapse of FTX? The risks and consequences of Alameda Research’s predicament demonstrate the implications of regulation and tax liability in the ever-changing landscape of cryptocurrencies.
Moreover, these developments serve as a reminder that even as progress is made within the cryptocurrency market, it is important to remain vigilant in understanding the regulatory environment governing these exchanges, especially as the distinction between worldwide income and revenue classification can have a significant impact on the financial solvency of an exchange.
The repercussions of FTX’s legal and financial issues not only affect the exchange itself but also its customers and the broader cryptocurrency community, raising awareness of the importance of continued trust and transparency within the industry.
Source: Cointelegraph
