Crypto users propose dropping lawsuit against Sam Bankman-Fried to pursue FTX influencers

19 Apr 2024

Subject to approval, the proposed settlement would resolve a civil suit between the former FTX CEO and users seeking recourse for losses during the fall of the crypto exchange.

A group of cryptocurrency users has reached an agreement with former FTX CEO Sam “SBF” Bankman-Fried as part of a class-action lawsuit filed in Florida.
In an April 19 filing in United States District Court for the Southern District of Florida, plaintiffs who sued FTX influencers in 2022 announced they had reached a settlement with Bankman-Fried. According to the filing, the plaintiffs recognized the expense and length of proceedings should they continue to pursue judgment against SBF, opting to use some of the information presented at his criminal trial to continue their case against FTX promoters.
“[Bankman-Fried] has knowledge and other information that Class Representatives and Class Counsel believe will be valuable to Class Representatives’ cases against other defendants in the FTX MDL [multidistrict litigation], particularly relating to the underlying actions and their connection to Miami, Florida, where FTX’s U.S. headquarters were based, as well as each MDL Defendants’ knowledge of and assistance with the actions and connections to other states in which jurisdictions over those Defendants is asserted,” said the April 19 filing.

Source: PACER

Subject to court approval, the settlement would resolve the lawsuit between SBF and crypto users seeking recourse for losses during the fall of FTX. The filing suggested that the plaintiffs proposed the settlement on March 28 — the day a judge sentenced Bankman-Fried to 25 years in prison for his conviction on felony felony charges.
The plaintiffs in the lawsuit proposed that Bankman-Fried assist in prosecuting FTX influencers and aid in victim recovery through documents and testimony provided during his criminal trial. The lawyers specifically cited information related to celebrities and companies responsible for endorsing the crypto exchange before its downfall, including sports stars Naomi Osaka, Tom Brady, Stephen Curry and Shaquille O’Neal.

The lawsuit, first filed in November 2022, shortly after FTX filed for bankruptcy, was consolidated into its present form in June 2023. The Moskowitz Law Firm, behind many crypto-based class-action lawsuits, represented the plaintiffs.
Bankman-Fried’s lawyers filed notice to appeal the former FTX CEO’s conviction and sentence on April 11. They also requested SBF remain at the Metropolitan Detention Center in Brooklyn rather than a federal prison in the San Francisco Bay Area to assist in his defense.

IRS releases draft of 2025 digital asset reporting form for US taxpayers

The U.S. Internal Revenue Service has been grappling with crypto tax reporting for years, and they may have a ways to go still.

The United States Internal Revenue Service (IRS), the country’s tax service, has released a draft of its new Form 1099-DA “Digital Asset Proceeds from Broker Transactions” for reporting income from digital asset transactions. The form is expected to come into use in 2025 for reporting in 2026.

A broker will prepare Form 1099-DA for every customer who sells or exchanges digital assets. Brokers include kiosk operators, digital asset payment processors, hosted wallet providers, unhosted wallet providers and others, per the form. Copies of the 1099-DA will be sent to customers and the IRS, which will use them for verification purposes.

The 2025 draft 1099-DA IRS reporting form. Source:

The form asks for token codes, wallet addresses, and blockchain transaction locations. Under the rule proposed in August 2023, cryptocurrencies, nonfungible tokens and stablecoins are reportable. The rule stated:

“With third party information reporting that specifically identifies digital asset transactions, the IRS could more easily identify taxpayers with digital asset transactions that are otherwise difficult to discover.”

The crypto community weighed in on the proposed reporting requirements after they were announced. The Blockchain Association said the rule contains “fundamental misunderstandings about the nature of digital assets and decentralized technology.”
Coinbase chief legal officer Paul Grewal said the proposed rules would set a “dangerous precedent for surveillance of the everyday financial activities of consumers by requiring nearly every digital asset transaction — even the purchase of a cup of coffee — to be reported.”
Commenters were no happier with the reporting rules for 2024.

Tax experts have also posted their comments on the web. According to crypto tax and accounting service Ledgible, reporting decentralized finance, where there may not be an intermediary to fulfill the reporting requirements, will be especially challenged by the new rule. It could also significantly increase brokers’ administrative burden, as many process very large numbers of transactions.

Source: Peter Van Valkenburgh

In addition, brokers will be forced to exchange information on digital asset transfers to determine the cost basis (initial value or purchase price) accurately, according to Gordon Law. They have no mechanism in place for such data sharing. Furthermore, there is no way to differentiate between self-transfers and taxable transfers if a crypto owner transfers assets between exchanges.
Taxpayers who underreported their crypto income in previous years may be caught when they report their taxes in 2025. Users of foreign exchanges that formally do not serve U.S. citizens will not submit the form, but the IRS may be able to detect the offshore activity if the taxpayer transfers assets to a U.S. exchange.
The IRS is continuing to accept comments on the draft form.

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