The claims of investors in the FTX bankruptcy remain uncertain pending the resolution of a $24 billion claim by the Internal Revenue Service (IRS).
In the aftermath of the November 2022 FTX meltdown and the conviction of disgraced founder Sam Bankman-Fried on seven counts of fraud, investors continue to seek some kind of return on their lost investments. As of August 2023, the New York Times reported John Ray, the current FTX CEO, has recovered and clawed back approximately $7B.
While the IRS initially filed a claim for $43B, it reduced its claim to $24B. Despite the large sums of money and digital coin lost by many creditors of FTX, the IRS remains the largest creditor in the bankruptcy. The recovery for lower-priority claimants depends largely on a resolution with the IRS that leaves money on the table.
In late November 2023, FTX filed a motion to essentially cancel the claim of the IRS for unpaid taxes. At issue is the math used by the IRS to support its claim. At present, bankruptcy claimants allege the IRS has not satisfactorily detailed its multi-billion-dollar claim against the company. Judge John Dorsey, with the Delaware Bankruptcy Court overseeing the FTX matter noted, “You might not get to a point where the debtors owe any taxes. Might be they owe a little bit of taxes, might be they owe a few million dollars, tens of millions of dollars. I don't know at this point because they don't have the benefit of the evidence."
The number of parties interested in a FTX bankruptcy payout has grown. FTX bankruptcy claims have become a hot commodity for speculative investors. Those who lost money in the FTX collapse are often willing to sell their stake in the bankruptcy proceeding for much less than face value in order to gain some return on their loss. Prospectors picking up those claims are anticipating a profit on their investment when the bankruptcy proceeding is cashed out. Media reports estimate approximately $1B to $1.5B in claims have been sold to investors during the current course of the bankruptcy.
A hearing to address the IRS claim in the FTX bankruptcy is anticipated early in 2024. Until then, creditors to the bankruptcy estate continue to hope for the best and speculators hope for even better.
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