FTX Bankruptcy Tax Reporting US 2026 – Claiming Your Losses

FTX collapsed in November 2022 and wiped out billions in customer funds almost overnight. If you had money there, I know you've been through it. Here's the one useful thing that comes out of a disaster like that: the losses are real, they're deductible, and they can make a meaningful difference on your tax bill.

The FTX Timeline for Tax Purposes

• November 2022: FTX freezes withdrawals and files for bankruptcy
• 2023–2025: Bankruptcy proceedings grind forward; partial distributions are announced
• 2024–2025: FTX starts repaying customers in USD — based on the dollar value of holdings at the time of bankruptcy, not current prices
• Tax year for your loss: Depends on when your loss became "fixed and determinable" — which is what triggers the deduction

IRS Guidance on FTX Losses

The IRS issued Rev. Rul. 2009-9 covering Ponzi scheme and fraud losses. FTX may qualify as a theft loss under Section 165 — and that matters because theft losses get better treatment than capital losses:

• Theft loss: Deductible as an ordinary loss, not subject to the $3,000 annual capital loss limit
• Capital loss: Standard treatment — $3,000/year cap against ordinary income, rest carries forward
• The IRS has not issued FTX-specific guidance. For any meaningful position, talk to a tax professional about which treatment applies to you

How to Calculate Your FTX Loss

Loss = Cost basis of crypto on FTX minus total recovery received.

One thing that catches people off guard: FTX's bankruptcy plan repays based on the USD value of assets at the time of the bankruptcy filing in November 2022 — not what those assets are worth now. Bitcoin was around $16,000 then. If it's $80,000 now, your recovery is still calculated at $16,000. You don't get the appreciation.

FTX Recovery Distributions

When your distributions arrive:

• Cash distributions are proceeds — they reduce your deductible loss dollar for dollar
• Token distributions: value them at FMV on the date received — that's your proceeds
• Remaining loss = original cost basis minus total proceeds from all distributions

Which Tax Year to Claim the Loss

You claim the loss in the year it becomes fixed and determinable. Most tax professionals recommend the tax year when the bankruptcy plan confirmed the recovery percentage — because that's when you actually know your total shortfall. Don't guess. Get professional advice on the timing.

Reporting on Form 8949

1. Date acquired: the original purchase dates of crypto you held on FTX
2. Date sold: the year you're claiming the loss realization
3. Proceeds: total recovery received across all distributions
4. Cost basis: what you originally paid for that crypto
5. Net result: a negative number — your capital loss

Amended Returns

Think you should have claimed this in an earlier year — like 2022? You can file Form 1040-X to amend, up to 3 years from the original filing deadline. Don't wait too long on this one.

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