Fox News contributor Andrew McCarthy says disgraced FTX founder Sam Bankman-Fried could face a ‘very, very high’ federal sentencing.
FTX customers will face a nightmare when they file their income tax returns next year. The firm’s legal and accounting problems may prevent customers from filing on time, and it could be months—or even years—before they can deduct their losses. There’s a good chance many FTX users, who numbered 1.2 million at the end of 2021, will be forced to file extensions.
Much depends on whether authorities charge Sam Bankman-Fried with a crime and how quickly investigators untangle FTX’s financial mess. A criminal proceeding should bring into play special IRS rules for Ponzi scheme investment losses, allowing for immediate deductions. Otherwise, FTX customers with frozen or missing assets will have to wait for IRS guidance, court judgments or claim deductions based on gray areas of the tax law.
“Customers of FTX are in a tax purgatory right now,” observes tax expert Victoria Haneman, Frank J. Kellegher Professor of Trusts & Estates at Creighton University.
Bernie Madoff’s legacy
Bernard L. Madoff headshot, former Madoff Investment Securities LLC chair who pleaded guilty to orchestrating a Ponzi scheme, graphic element on gray (AP Images / AP Images)
“If you look back at the scandal with Bernie Madoff, he was charged in December of 2008 and the IRS didn’t come out with guidance on him until March of 2009,” she says.
