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IRS files $44B claims against bankrupt FTX
- newprint 3y agoThis is f** wild. I don't understand level of incompetence it took to trust him with that much money. People who trusted them with this much money are fools. Fools with large $$$.
- killingtime74 3y agoA bit of incompetence and a lot of greed. If someone says they can make you a lot of money, you're willing to ignore a lot of things. You just hope you're not the bag holder at the end. As long as there is greed there's always going to be more FTX and Theranos.
- hef19898 3y agoBesides too much money, which they were parted from like fools, they had also too much hopenof finding even greater fools. Doesn't work all the time so, sometimes you actually are the greatest, ot at least unluckiest, fool in that particular game of fools.
- onlyrealcuzzo 3y agoWhen you're trying to start a magic bean farming business, and you end up investing with a crook who blows all your money on coke & hookers before your magic bean business gets off the ground... it's a little bit of expedited justice, isn't it?
- hef19898 3y agoI don't mind investors loosing money, that's part of the game and if you fail to do a proper due diligence and risk evaluation, well, you get what you deserve. All the people loosing money with FTX as users, well, they are a different story.
- mschuster91 3y agoEspecially ludicrous given that a large point of the USP of crypto-currencies was that you didn't need to trust anyone because The Blockchain and smart contracts renders "trust" obsolete. In the end, it all was bullshit, and (assuming the US government is correct with the re-classification of "independent contractors") exploitation and fraud.
- VoodooJuJu 3y agoThe most enlightening things to come out of the crypto craze: 1. There is an overwhelming abundance of rich idiots in this world. Wealth-merit determinism has been publicly dealt a serious blow that I hope people will take to heart. 2. Finance is a mature and ever-evolving complex technology in itself that has proved why it is the way it is, and no amount of idealist nerds and their "investor" fools can possibly knock it down. It must be humbling to rediscover every regulation and facet of finance, one crypto-blunder at a time. Finance as an industry attracts some of the world's most intelligent and most ruthless individuals, but you think they're somehow leaving money on the table? You think you can do better because you know python and cryptography 101? Really?
- JumpCrisscross 3y ago> an overwhelming abundance of rich idiots in this world One of the smartest things I heard said about crypto is it’s an unvarnished metric of the animal spirits in our world. Its optimal price isn’t zero. But somewhere just above it. Enough to inspire productive work, but not enough to gain animation of its own.
- ragnot 3y agoSoftware engineers have been re-inventing concepts again and again since the 1970's. It isn't that much of a stretch to believe that they would do the same thing to finance.
- phone8675309 3y agoToo bad most of them don't bother to learn anything about finance before trying to disrupt it and instead fall back on libertarian wet dreams of feeling the ghastly embrace of the ghost of Ayn Rand.
- joebob42 3y agoSoftware also kind of has reinvented finance. The crypto thrust specifically not so much, but the modern financial system does not look the way it does without software.
- 3y ago
- NSMutableSet 3y agoI would like to see more celebration of the employees who confronted SBM and were then fired for "performance" or "culture fit". That behavior needs to be rewarded, not forgotten.
- lazide 3y agoYou’re welcome to get the ball rolling.
- samstave 3y agoThere is ZERO 'incompetence' --> it is skilled fraud. Madov level.... this guy needs to not kill himself with a sheet in prison. This is a guy who is an utter piece of shit, and his FN STANFORD parents were certainly in on it and they need to go down as well, but they are a smoke screen.
- deleted 3y ago[deleted]
- thesausageking 3y agoSequoia, NEA, Lux, Insight, Lightspeed, ... these are brand name funds and they were completely duped. Sequoia wrote a glowing, 15,000 word piece about Sam: https://web.archive.org/web/20220922164619/https://www.sequoiacap.com/article/sam-bankman-fried-spotlight/ https://web.archive.org/web/20220922164619/https://www.sequo... How do investors put in >$1B without doing any real diligence or having the company setup a board or even have a CFO.
- supermatt 3y agoWould the IRS get priority on any assets?
- justinzollars 3y agoYes.
- nrmitchi 3y ago> 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
- carrja99 3y agoA tall order to expect HN commenters to click through to the article. :-P
- supermatt 3y agoYeah, 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".
- prasadjoglekar 3y agoYes, 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..
- tedivm 3y agoRetrospective 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".
- AbsoluteCabbage 3y ago[flagged]
- chickenpotpie 3y ago> IRS is the one criminal cartel you can’t mess with Many actual cartels literally behead people.
- AbsoluteCabbage 3y agoSo cutting peoples heads off is your criteria for being a cartel? Okaaaay.
- deleted 3y ago[deleted]
- johngladtj 3y agoThe us just drone strikes them
- HDThoreaun 3y agoI do not believe the IRS has ever drone striked anyone
- mrguyorama 3y agoI would be impressed if we could even find a case of an IRS agent pulling their service weapon out of it's holster on the job.
- outside1234 3y agoHonestly we need 10x the number of IRS folks to track all of these cheats down.
- brewdad 3y ago
- Animats 3y agoThe FTX bankruptcy will now probably be converted to a straight liquidation. The current management has the fantasy that they can emerge from Chapter 11 reorganization as a going concern. Not likely. There's no ongoing business worth continuing.
- toomuchtodo 3y agoAt least this saves a bunch of human hours that would've been spent untangling everything. Check gets cut to the US Treasury and that's a wrap.
- Etheryte 3y agoIt's unlikely that this will save much in the way of that, you still have to go through the bankruptcy proceedings, just now you also have the IRS digging through your things.
- JumpCrisscross 3y agoLiquidation is more straightforward than trying to keep the beast alive while you operate on it.
- deleted 3y ago[deleted]
- SamBankmanFried 3y agoI doubt the new management actually believes they can reboot the company. They're just trying to drag things out as long as possible to extract as much money as they can. The new CEO is getting paid $1300/hr. https://fortune.com/2022/11/21/new-ftx-ceo-john-ray-hired-clean-sam-bankman-fried-mess-paid-1300-hour/ https://fortune.com/2022/11/21/new-ftx-ceo-john-ray-hired-cl...
- Montaque 3y agoSurely your attorneys double their fee every time you do an online post?
- deleted 3y ago[deleted]
- Illniyar 3y ago"This suggests that the department reclassified all of FTX’s contractors to full-time employees in order to arrive at such a large tax payroll-related tax claim." Genius. Why not, free money. Unless of course you don't think government agencies should play fast and loose with their enforcement based on the likelihood of the defending party to successfully resist.
- justapassenger 3y agoYour argument being what? Government shouldn't enforce laws, especially when it comes to one of the biggest scams of the century?
- phone8675309 3y agoMost likely their argument is "but this will keep my from recouping the money I had in FTX when it went bust because I'm in the class of people who are last to get paid out"
- Illniyar 3y agoThat a government agency shouldn't knowingly lie to try and get a piece of the pie. They shouldn't artificially inflate a tax bill so that they can have more leverage. There is no doubt in anyone's mind that that tax bill isn't real, it's obviously a negotiation tactic to try and get a larger cut. I don't think that's something that a government agency should do, even if the target is a giant fraud. 44B$ is more then FTX's ever had in assets, it's definitely more then they had in revenue and more then they probably ever paid employees. And taxes should be a fraction of that on top of what they probably did pay.
- deleted 3y ago[deleted]
- outside1234 3y agoIt's not free money. They stole the money from us, the actual taxpayers.
- 3y ago
- hanniabu 3y agoIRS gets priority over creditors but what about the users of the platform that? Are they categorized as creditors?
- rootusrootus 3y agoI'd figure that for most people FTX would be part of an investment strategy (or gambling), not any kind of bank. So these are not depositors, they are investors, probably lowest on the priority list. They will get wiped out.
- JumpCrisscross 3y ago> what about the users of the platform Mixed precedence [1]. Where assets were ringfenced, the courts are treating those users as asset owners. Unsecured creditor is the default. Lowest rung. This is true pretty much across web3/crypto. [1] https://www.ft.com/content/a87860bf-a8bf-4669-a152-de465c83a19c https://www.ft.com/content/a87860bf-a8bf-4669-a152-de465c83a...
- vitehozonage 3y agoYes they are just creditors. So IRS is basically trying to take from the users by filing it in this way. Great way to serve the public...
- outside1234 3y agoThis is what is in the prospectus that you read before you put your money in these firms. They are subject to normal liquidation seniorities.
- renlo 3y agoIt's like a thief steals all of the money from your bank account, he gets arrested, you file a claim to get your money back from his accounts, but before you can the IRS swoops in to claim all of the money because the thief didn't claim your stolen money when he filed his income taxes. I understand that all of the FTX depositors (technically "creditors") should have read the fine print, but that's what this feels like at least.
- m3kw9 3y agoHow fk are they now?
- LammyL 3y agoDoes this also suggest that the execs charged with the FTX fraud may also get hit with a huge tax bill?
- dh2022 3y agoSo IRS is asking FTX to pay millions of dollars in unpaid payroll taxes as result of classifying FTX workers from contractors to employees. Will IRS refund said workers the payroll taxes workers paid as part of their Schedule-C? (Contractors pay their own payroll taxes when they file Schedule-C; companies pay payroll taxes for their employees, but not for their contractors)
- rickreynoldssf 3y agoEmployers pay an additional tax on payroll. The withholdings they send to IRS is not considered a tax.
- deleted 3y ago[deleted]
- ericpauley 3y agoContractors have to pay both halves. If they did this (big if) they’d be owed a refund.
- 300bps 3y agoWhen you're a 1099 contractor you fill out Schedule C and pay as the employee and the employer.
- throwway120385 3y agoThere was a nice tax holiday on this a few years ago.
- PopAlongKid 3y agoThere was a deferral due to Covid for paying self-employed tax, but it still had to be paid eventually.
- prepend 3y agoWhen I did my own withholding, I had to withhold Medicare and social security taxes on my employees behalf and deposit it quarterly. These are certainly taxes and there is withholding for the employer portion as well as for the employee portion withheld on their behalf along with income and any other applicable taxes. Here’s a quote from the IRS [0]: “ An employer generally must withhold social security and Medicare taxes from employees' wages and pay the employer share of these taxes.” [0] https://www.irs.gov/businesses/small-businesses-self-employed/understanding-employment-taxes https://www.irs.gov/businesses/small-businesses-self-employe...
- tombert 3y agoI sincerely hope that I never meet Sam Bankman Fried, because if I did I do not know what I would do but it certainly wouldn't be legal. I was stupid and thought that the 7+% interest I was getting from Gemini+GUSD+Genesis Holdings was a good idea, I put a good chunk of money in there, and as of right now the status for that appears to be in "limbo at best". It's particularly upsetting, because this all unfolded right after I got fired from my last job, when I really needed my liquid money to pay for things like "my mortgage" and "food". I'm fine now fiscally, and even wasn't in too much trouble back in November [1], but it make me lose multiple nights of sleep worrying about stuff, and also made me feel like an idiot for ever thinking that cryptocurrency was a good idea. [1] I have a good chunk of money stashed in stocks/ETFs, which I could have liquidated for money, but the market was pretty far down so I would have had to take a big haircut.
- cwkoss 3y agoFTX failure isnt a cryptocurrency problem, its a plain old boring case of financial mismanagement and fraud. Good reminder to all here that if you don't hold they private keys to your crypto, all you have is an IOU from a risky new business.
- CapstanRoller 3y agoHow would holding keys to a crypto wallet full of FTT prevent large-scale fraud via currency manipulation and subsequent devaluation of your holdings? This is indeed a failure of crypto, because FTX was the one primarily in control of the coin supply.
- EGreg 3y agoBitcoiners ask the same thing about holding a bank account full of dollars, or in many other countries (like Lebanon, etc.) even worse currency, or they can just freeze your account, etc. Anyway, it should be clear to people that the 7% in an outside currency has to come from somewhere. And most of this stuff has been a zero-sum game so the money comes from: 1) Investors who bought the top 2) Traders who got liquidated 3) IPO investors who bought shares in a money-losing business model like WeWork 4) Advertisers whose ads didn’t pay off (yes, advertising is a zero-sum game too) Sadly, most people do not realize it’s a zero sum game and the bagholder class only grows and grows until the speculative bubble pops.
- TacticalCoder 3y ago[flagged]
- gameshot911 3y agoAre you arguing that the tax assessment is incorrect in some way, or just generally upset that the IRS stands before other creditors in the US?
- CapstanRoller 3y agoCheck the comment history. He's a typical lolbertarian
- deleted 3y ago[deleted]
- nradov 3y agoThe IRS is legally required to seek all income taxes owed under federal law. That is hardly thievery. If the tax laws are unfair then take that up with Congress. As for what the NY Times printed, that has zero relevance to tax liabilities.
- rickreynoldssf 3y ago...and here's the other shoe dropping for all the people thinking they were going to get at least some money back.
- whats_a_quasar 3y agoFTX probably did have unpaid taxes, but could they have gotten to a $44B dollar unpaid bill? That implies revenue or payroll of order-of-magnitude $200B. I don't know FTX's finances but that seems extreme, even for them. The article also only mentions what half the bill is. $20.4B of partnership taxes and unpaid payroll, but no info on the other $23.6B of taxes. Edit: From a random googled article: $1.02B of revenue in 2021. It seems like a long jump from that to a $44b tax bill - even if they had perfect accounting they would never have been able to pay that much https://www.cnbc.com/2022/08/20/ftx-grew-revenue-1000percent-during-the-crypto-craze-leaked-financials.html https://www.cnbc.com/2022/08/20/ftx-grew-revenue-1000percent...
- robinson7d 3y agoArticle says “ According to bankruptcy filings on April 27 and 28, the IRS filed claims worth nearly $44 billion against the firms, including FTX.US and Alameda Research.” Clicking through to the list of filings shows about 1850 items (rounded, 93 pages of 20 filings each), many of which don’t appear to be against FTX. For example there’s a $2.5 billion one on the first page against “Paper Bird Inc”, who I haven’t looked up yet.
- robinson7d 3y agoWelp, guess I picked a bad one. Paper Bird Inc seems to be owned by Sam Bankman-Fried… but anyway maybe they aren’t all owned by him, and regardless it might partially explain why the revenue numbers GP was looking up are much lower than the claims.
- dpflan 3y agoAmazing find, a list of each entity and owner would be great to see considering you chose a random company and yet it was within the SBF sphere of influence. What was the end game for FTX? Funneling money to its own shell companies to achieve…
- chrisco255 3y ago
- AllegedAlec 3y agoAll we can hope for is that the entire policule is crucified. These financial criminals keep getting away with stealing absurd sums and we need examples to be made.
- phone8675309 3y agoIt's always wild to me when people bring up the polycule. The people who defrauded you are criminals. Who cares who they slept with and how they decided that unless you're a bitter baby virgin who is jealous they got your money and they got sex and you're left with just your right hand and an empty bank account?
- AllegedAlec 3y agoJeesh man, projecting much?
- GCA10 3y agoThe IRS has been signaling hard the past few years -- to all employers, big and small -- that the "contractor" category only works if you meet a bunch of tests. Anyone with a Gusto account, or a working HR department, knows this. From a social-equity standpoint, I'd rather see FTX depositors get some cash, instead of having the IRS book the biggest recoveries. But in terms of what the law is, if we're looking at total FTX contempt for the right way to classify people on its payroll, it's hard to argue against the IRS coming down hard on this one.
- phone8675309 3y agoMaybe if they break FTX's finances and spirit with this enforcement action it will both give the people willing to pull shenanigans like this pause to do so and also give investors pause from putting their money into obvious scams.
- thesausageking 3y agoYou can't paint it with such a broad brush. Employment laws are very fact specific and differ state to state. California was pretty sure Uber drivers were contractors, they brought an action, and the courts found against them. You really can't say unless you drill into a number of hairy specifics. Not to mention, FTX was in the Bahamas and Alemada Research was based in Hong Kong, so people working there may not even be covered by US employment law. This claim is the IRS to making up the biggest plausible number it can and then using that to review the facts and make a case to the bankruptcy judge.
- mikeyouse 3y agoFun fact, the Kroll organization who's hosting the bankruptcy docs / helping manage the process is the successor org founded by Nick Kroll's father (from The League). He sold it and started several new ventures with similar names. https://time.com/6095957/jules-kroll-private-detective-profile/ https://time.com/6095957/jules-kroll-private-detective-profi...
- Trias11 3y agoTo all the idiots who lost money with SBF - please stop blaming SBF. Even if ya'll will be given all your money back - you'd still manage to lose it again in a short time and blame someone else. SBF has nothing to do with it. Your mindset and you do.
- jokoon 3y agoI'm not american, but sometimes I wonder if those things happen because a smart evil person manages to convince another negligent and unintelligent person to do a bad thing and take responsibility for it. I mean I don't think we need full communism to prevent and solve this kind of crazy finance thing, but it's really weird how americans will often fight against common sense regarding finance, safety and risks. There are days I want to believe capitalism can be "reformed" and made better, but other days, I tend to think finance should be managed and tightly controlled by the government to limit the level of damage foul play can do. And yet I can already hear armchair economist answering me about the invisible hand, the collective intelligence of the free market, decentralized decision making, etc. It is really weird how currency and economics have been hijacked by politics. Such a weird phenomenon.
- libraryatnight 3y ago[flagged]
- vxNsr 3y agoI’d be happy to engage: please suggest a better system that does a better job of channeling people’s selfishness vs capitalism.
- libraryatnight 3y agoI'm not anti capitalism, but it needs better regulated. This is my point. We say we need some guard rails and safety protections, you take it as I want to burn capitalism to the ground. same with guns. We need gun control. There's a world of gun control examples to sample and decide what or what combination might be a good starting point for us, we can't get to the table to talk about it.
- vxNsr 3y agoRight now in the US we live in a very heavily regulated capitalist system. I’m not sure why you think there are no laws regarding capitalism. The same is true of gun control. There are many, many laws already on the books regarding gun control. Yet you take the disingenuous approach of “they won’t even engage in a discussion about any sort of regulation”. The discussion is happening constantly, just because the outcome isn’t the one you want it doesn’t mean there isn’t a conversation.
- Trias11 3y agoI guess IRS has bigger elbows than other creditors to put itself in front of a judgement. Many others can pretty much pack and go
- deleted 3y ago[deleted]
- guywithahat 3y agoAs much as I dislike FTX/Sam, there's no way this is correct. What the IRS is probably doing is naming the highest number they can think of in hopes of increasing the percent of liquidated holdings they get once this goes through bankruptcy, which is particularly scummy considering they're just taking the money from people who actually deserve it.
- deleted 3y ago[deleted]
- dagaci 3y agoCould this be some kind of turf war between regulator/govenment entities to gain control over the spoils?
- ffhhj 3y agoIt's the 80's "war on drugs" all over again. A government being so powerful that could capture drug lords from other nations and get their money back, so now they can have the pie and eat it too. How many people from other countries invested money in FTX? How much they'll get back? Who is getting all of it by throwing legal dragnets?
- chii 3y ago> they're just taking the money from people who actually deserve it. why isn't tax collection "deserving"?
- __turbobrew__ 3y agoPeople on HN have been calling BS on crypto for as long as crypto has been a thing. Crypto has not provided any value to society — besides giving people a false sense of security when buying drugs — but somehow it is a multi billion dollar market. The fundamentals never checked out and crypto has never been more than a curiosity for academics and tech geeks. I’m no Michael Bury but it was pretty obvious this was eventually going to fail, the unknown was when. The whole system was so rotten you could not short crypto without exposing yourself to the same systematic risks which would cause the eventual collapse. Maybe your shorts were right, but good luck getting any money out after the whole thing implodes. People will continue to get scammed for the rest of eternity so I think the best thing we can do is set up strong safety nets and welfare for those who lose their life savings. Regulation does help, but scammers will always find new ways.
- pauljurczak 3y agoThey should have done it when he still had a few billions...