- On Friday, the crypto exchange FTX along with Alameda Research and its 130 associates filed for Chapter 11 bankruptcy.
- Soon after the company filed for chapter 11 bankruptcy, the chief executive officer, Sam Bankman-Fried resigned from his post.
- Currently, John Ray III is the CEO of FTX.
The tax confusion
In 2022, some exchanges such as Celsius Network and Voyager Digital have also filed for bankruptcy. Now, stakeholders are thinking about if they are going to get payouts. There os small to no example for large scale bankruptcy in the crypto world. Also, the tax results for investors and other stakeholders are not clear because of the nature of the technologies around cryptocurrency and thor categorization as property.
The head of government solutions at TaxBit, Miles Fuller gave an interview in which he told that, this is a fresh basis for bankruptcy law, because how frequently is it we have highly volatile assets similar to this?” also, the creditors , those who will get remuneration as a consequence of a claim against the debtor are particularly retail consumers, instead of other mature businesses.
In the period of bankruptcy proceedings, it will be made sure that which customers are eligible for creditors. According to Fuller it is a novel situation as it is questionable that the crypto assets FTX liquidated will be owned by them, or their customers. Through his point of view, the customer practically surely should be acknowledged an slacked creditor. If this is something as anticipated, customers may have to lose everything and may not get those things back.
It will also be interesting to see whether the payout comes in the form of crypto or fiat currency and what will be the amount. It is also not very clear that at what time the assets will be valued. In 2022, everyone has witnessed a bearish market. Currently, Bitcoin is aalso trading below $17,000.
If any exchange who has filed for bankruptcy holds the withdraws on the platform, customers won’t be able to access their assets. Still, they have not suffered a loss, still the assets are in a sort of misery. A loss will possibly not push till the bankruptcy process wraps up. As described by Fuller, a loss can’t be identified till it is in a way concluded or crisp. A taxpayer wil not not be capable of estimating a loss if they don’t know that what will be the final amount of payout they are going to get from a bankruptcy case.
Source: https://www.thecoinrepublic.com/2022/11/19/ftx-bankruptcy-leads-to-tax-confusions/