- The cryptocurrency exchange FTX and the IRS have reached a tentative agreement to settle a long-standing $24 billion tax dispute.
- This proposed settlement includes significant financial adjustments and awaits court approval before proceeding.
- The agreement highlights FTX’s strategic goal to reduce litigation risks and ensure a clearer pathway for creditors and customers.
FTX agrees to a historic $885 million settlement with the IRS to resolve a massive tax dispute, marking a significant milestone in the ongoing bankruptcy proceedings.
FTX’s Tentative $885M Settlement with IRS
FTX, the bankrupt crypto exchange, has disclosed a tentative agreement with the IRS to resolve a massive $24 billion tax dispute. Announced in a recent court filing, the proposed deal involves FTX paying $200 million as a priority tax claim and $685 million as a subordinated claim, subject to court approval. This agreement is designed to address outstanding tax issues up until the cutoff date of October 31, 2022.
Implications for Creditors and Customers
This proposed settlement is a critical move by FTX to minimize extended litigation risks and aim for recovery certainty for creditors and customers. By agreeing to this settlement, FTX seeks to establish a clearer and expedited pathway for all involved parties. “This deal marks a substantial reduction in litigation risks and enhances the clarity of the recovery process for everyone,” an FTX spokesperson said.
Reorganization Plan Outlines High Creditor Repayment
On May 8, FTX revealed a comprehensive reorganization plan aimed at full compensation of all valid creditor claims. According to this plan, creditors with claims less than $50,000 are slated for 118% repayment, effectively covering 98% of FTX creditors by number based on asset valuations at the time of its collapse in November 2022.
Challenges and Contention with IRS Calculations
Despite the agreement, FTX has contested several aspects of its tax liabilities. The exchange disputes the IRS’s calculations, particularly arguing against being taxed on funds allegedly misappropriated by former CEO Sam Bankman-Fried. Additionally, FTX challenges the IRS’s employment tax assessments on salaries paid to Bankman-Fried and other executives. The exchange argues for legitimate deductions and losses, though the IRS counters, citing inadequate documentation.
Conclusion
This significant settlement proposal, pending court approval, represents a strategic maneuver by FTX to resolve extensive tax disputes and provide a clearer road to recovery for creditors and customers. As FTX moves forward with its reorganization plan, the crypto exchange aims to rebuild trust and demonstrate its commitment to rectifying past management issues.
