FTX Bankruptcy Tax Reporting US 2026 – Claiming Your Losses

Hundreds of thousands of US investors lost funds in the FTX collapse. After years of bankruptcy proceedings, here is the definitive guide to claiming FTX losses on your taxes.

The FTX Timeline for Tax Purposes

• November 2022: FTX freezes withdrawals and files bankruptcy
• 2023–2025: Bankruptcy proceedings; partial distributions announced
• 2024–2025: FTX begins repaying customers in USD (at dollar-value of holdings at bankruptcy)
• Tax year for losses: Depends on when your loss became "fixed and determinable"

IRS Guidance on FTX Losses

The IRS issued Rev. Rul. 2009-9 and related guidance on losses from Ponzi schemes and fraud. The FTX situation may qualify as a theft loss under Section 165, which has more favorable treatment than capital losses:

• Theft loss: Deductible as ordinary loss (not subject to $3,000 capital loss limit)
• Capital loss: Standard treatment; $3,000/year limit against ordinary income
• The IRS has not issued specific FTX guidance – consult a tax professional for your situation

How to Calculate Your FTX Loss

Loss = Cost Basis of crypto on FTX − Total Recovery Received

Important: FTX's bankruptcy plan repays customers based on USD value of assets at bankruptcy filing (November 2022) – not current crypto prices. If Bitcoin was $16,000 at bankruptcy and is now $80,000, your recovery is based on $16,000.

FTX Recovery Distributions

When you receive FTX recovery distributions (cash or tokens):

• Cash distributions are proceeds – reduce your loss dollar for dollar
• Token distributions: value at FMV on date received = proceeds
• Your remaining loss = original cost basis − total proceeds received

Which Tax Year to Claim the Loss

You can claim the loss in the year you have sufficient information to determine it is fixed and determinable. Most tax professionals advise claiming in the tax year when the bankruptcy plan confirmed the recovery percentage. Consult a tax professional to pick the optimal year.

Reporting on Form 8949

1. Date acquired: original purchase dates of crypto on FTX
2. Date sold: year of loss realization
3. Proceeds: total recovery received
4. Cost basis: original investment on FTX
5. Net loss: negative figure on Form 8949

Amended Returns

If you believe you could have claimed losses in a prior year (e.g., 2022), file Form 1040-X to amend within 3 years of the original filing deadline.

Disclaimer: This article is for general informational purposes only and does not constitute tax advice. For individual tax advice, consult a licensed tax professional.