FTX settles $24 billion IRS claim for fraction to prioritize customer repayments FTX settles $24 billion IRS claim for fraction to prioritize customer repayments
According to the terms of the settlement, the IRS will receive a $200 million priority claim to be paid within 60 days after FTX's proposed restructuring plan is implemented.
1 min read
Updated: Jun. 4, 2024 at 8:16 pm UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
Defunct crypto exchange FTX has agreed to settle the Internal Revenue Service (IRS) substantial $24 billion tax claim for a significantly lower amount to help the company prioritize its customer repayments during its ongoing bankruptcy process.
According to the terms of the settlement, the IRS will receive a $200 million priority claim to be paid within 60 days after FTX’s proposed restructuring plan is implemented.
Additionally, the IRS will receive a $685 million lower-priority claim. This secondary claim will be paid on a subordinated basis only after customers and other creditors have been satisfied and only if funds are available.
The details were outlined in a June 3 filing with the US Bankruptcy Court for the District of Delaware.
The settlement is a crucial step in resolving FTX’s bankruptcy issues, removing a significant potential obstacle. Without this agreement, a protracted legal battle with the IRS could have jeopardized the repayment plan for FTX’s customers.
The company previously contended that an upheld $24 billion IRS claim would severely impact customer repayments.
In the court filing, FTX emphasized that the settlement provides clarity and facilitates a quicker resolution of the bankruptcy case, enabling a prompt distribution of funds to creditors and customers.
The company said:
“This settlement provides much-needed certainty regarding the magnitude of the IRS claims and allows these Chapter 11 cases to move swiftly toward resolution.”
FTX has expressed its commitment to fully repaying its customers despite acknowledging potential significant tax liabilities to the IRS. The company disputed the IRS’ $24 billion claim but recognized that the agency’s demands presented complex legal challenges.zz
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Assad Jafri
AJ, a passionate journalist since Yemen's 2011 Arab Spring, has honed his skills worldwide for over a decade. Specializing in financial journalism, he now focuses on crypto reporting.
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FTX
FTX is a defunct cryptocurrency exchange, currently in bankruptcy proceedings, that was founded by Sam Bankman-Fried and Zixiao “Gary” Wang in May 2019.