Tax Impacts

In this installment, we highlight two recent notable court cases, cover recent developments in Washington related to enforcement efforts related to the Employee Retention Credit (ERC), and highlight recent IRS guidance as to the taxation of staking rewards within the cryptocurrency space.

On November 11, 2022, FTX filed for Chapter 11 bankruptcy protection along with over 102 other FTX-affiliated entities. The company operated as a digital asset exchange, with several subsidiaries and affiliates, which included Alameda Research, a related cryptocurrency hedge fund. The bankruptcy of the entire operational enterprise and digital asset hedge fund has been a seismic event in the digital asset community, affecting over one million customers and eliciting attention from numerous governmental and banking organizations, including the Board of Governors of the Federal Reserve System (Federal Reserve), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC), which recently issued a joint statement calling attention to certain potential risks associated with digital assets and digital asset sector participants. Notably, the SEC and CFTC are also investigating FTX and analyzing acceptable regulatory framework for the industry.