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supermatt

Would the IRS get priority on any assets?

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> The IRS’ claims against the crypto exchange could take precedence over claims of other FTX creditors.

It's literally the first text after the headline

A tall order to expect HN commenters to click through to the article. :-P

Yeah, I read the article, but it seems insane that the government would get priority for the taxes earned stemming from claimants investments over the initial investments themselves. I guess I should have emphasized the "WOULD".

In both Chapter 11 (FTX) and Chapter 13 cases, priority tax debts are generally paid before other unsecured debts, meaning the IRS gets priority in these cases. However, secured creditors may still have priority over the IRS for specific assets.

I'm going to guess that the IRS is going to take the lion's share of assets.

At this point the US government/IRS has got to be the largest holder of crypto in the world.

The ironing is delicious.

Uncle Sam is the ultimate repo man.

Yes.

Yes, but for that much money, it will be litigated and should be. Deference to the IRS for this sort of retrospective taxation is not a good idea..

Retrospective taxation implies that a change was made to the tax code that went back in time. The reality is the tax code didn't change at all, but the fact that FTX was cheating on their taxes was discovered and adjusted for.

Now I'm sure it'll get litigated, but there's a big difference between "I cheated my taxes and got caught" versus "I paid all my taxes, but then the rules changed and now I owe more".

> it will be litigated and should be

They’re almost certainly inflating the claim in preparation of litigation, e.g. by reclassifying “all of FTX’s contractors to full-time employees.” (There is pressure, in such bankruptcies, to file claims fast.) But the current claim is 4x FTX’s cash. It’s unlikely the IRS is off by 4x. Unsecured creditors’ recovery is likely going to be zero.

The numbers seem too large to be employee reclassification for reasonably-paid employees, no? I would think it's more likely the IRS is calling the embezzled money income and/or wages.

> numbers seem too large to be employee reclassification for legitimately-paid employees, no

Yes. Which is why it’s unlikely to expect the claim to quarter. (It might get reassigned from FTX to Alameda or Blockfolio, though.)

> it's more likely the IRS is calling the embezzled money income and/or wages

Partnership taxes on the embezzled money.

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