- The bankrupt cryptocurrency exchange FTX has reached a $200 million settlement with the IRS over a tax penalty issue, pending court approval.
- This settlement removes a significant obstacle in FTX’s bankruptcy proceedings.
- The news of the agreement has positively impacted FTX’s native token, FTT.
FTX finalizes a crucial tax settlement with the IRS, paying $200 million to resolve claims as the platform’s token sees an uptick.
FTX Agrees to $200 Million Payment to Settle Tax Dispute with IRS
FTX, the insolvent crypto exchange, has negotiated a provisional settlement with its largest creditor, the United States Internal Revenue Service (IRS). The dispute initially saw IRS claims exceeding $44 billion, which were later reduced. The settlement awaits court approval for FTX’s restructuring plan. Under this agreement, the IRS will resolve its $24 billion tax claim, and FTX will pay $200 million in priority tax claims within 60 days post-approval. Additionally, the IRS will collect $685 million, subordinated to other creditors and customers.
The Impact on FTT Token Price
The settlement news has positively influenced FTX’s token, FTT. The token experienced a surge from its intra-day level of $1.55 to $1.66, later stabilizing at $1.62, marking a 3.78% daily increase at the time of writing.
FTX’s Position on Tax Liability
The agreement, covering tax claims until October 31, 2022, helps FTX mitigate litigation risks while boosting recovery certainty for creditors and customers. Despite acknowledging its tax liability, FTX disputes the specific amount and rationale behind the owed taxes. The exchange argues against being taxed on misappropriated funds by its former CEO Sam Bankman-Fried and contests employment tax calculations related to executive compensation.
Payment Plan for Creditors
FTX maintains that the IRS has overlooked legitimate deductions and losses due to documentation issues. Although the IRS disagrees, it is prepared to challenge FTX in court over the significant tax liability. FTX’s recent repayment plan, proposed on May 8, aims to fully reimburse creditors and provide additional compensation. Creditors with claims under $50,000 will be eligible for a 118% recovery based on FTX’s asset values at the time of its collapse in November 2022.
Conclusion
FTX’s settlement with the IRS represents a significant stride in its bankruptcy process. By resolving a major tax dispute and offering a clear path for creditor repayment, FTX aims to stabilize its operations and restore creditor confidence. This development not only impacts FTX’s stakeholders but also offers a glimpse into how intricate tax and legal challenges can be navigated within the crypto industry.
