Lawyers for FTX have hit back against a tax claim from the Internal Revenue Service (IRS) that seeks $24 billion in payments from the bankrupt crypto exchange.

In a court filing on Sunday, the FTX debtors asked the IRS to substantiate how it estimated this tax claim – a figure that was initially as high as $43 billion, before it was revised lower to an amount that still remains unjustified according to the bankruptcy estate.

FTX’s lawyers argued that the exchange never earned anything near the amounts that could support the $24 billion tax claim, and instead, sustained billions of dollars in losses over the roughly three years that it operated. 

Audit firm EY calculated that FTX owes $11 billion in losses over the course of 2020, 2021, and 2022. The firm also found that the most FTX had ever purported to earn from operating the exchange was $334 million, which would amount to a tax liability of $34.7 million. 

“There is simply no basis to support the IRS’s meritless claims that the Debtors owe tax in an amount that is orders of magnitude greater than any income the Debtors ever earned and that would effectively prevent most of FTX’s creditors—themselves victims of fraud—from obtaining any meaningful recovery,” they said.

Both the FTX bankruptcy estate and EY have responded to 2,300 IRS information requests over the last few months, and FTX’s lawyers now say there’s no reason for an additional lengthy discovery period to address tax issues that have already been evaluated. 

Earlier this year, the FTX bankruptcy estate said it had recovered $7.3 billion in assets, the majority of which were in liquid assets. In October, the FTX debtors said they intended to refund 90% of creditors’ claims if its amended bankruptcy plan is approved by the court by the second quarter of 2024.