- Bankrupt crypto exchange FTX has struck a deal with the IRS over a contested $24 billion claim, according to Bloomberg Law.
- The settlement facilitates FTX’s plan to repay its creditors, enabling significant customer recoveries.
- In a pivotal moment for FTX, the IRS has agreed to accept a $200 million payment within a specified period, easing the path towards the exchange’s restructuring.
FTX finalizes a major settlement with the IRS, enabling swift customer fund distributions and paving the way for effective restructuring.
Significant Settlement in FTX’s Bankruptcy Case
FTX has negotiated a crucial settlement with the IRS as part of its ongoing bankruptcy proceedings. As per the settlement terms, FTX is obligated to pay the IRS $200 million within 60 days following the confirmation of its proposed reorganization plan. Additionally, the IRS will hold a subordinated claim of $685 million, payable only after higher priority claims are addressed, depending on available funds. This arrangement, documented in a filing in the US Bankruptcy Court for the District of Delaware, marks a substantial step forward in FTX’s efforts to resolve its bankruptcy issues.
Avoiding Prolonged Litigation
The agreement with the IRS significantly reduces the risk of extended litigation, which could have stalled the distribution of customer funds. This settlement not only clarifies the extent of the IRS’s claims but also accelerates the resolution of the Chapter 11 cases, allowing FTX to proceed with distributing assets to its creditors and customers more efficiently. The settlement, as highlighted in the court filing, mitigates one of the major legal uncertainties looming over FTX, facilitating a smoother and quicker restructuring process.
Commitment to Reimbursing Customers
FTX has communicated a strong commitment to repaying its customers, reassuring them that they will receive a minimum of 118% of their allowed claims in cash, totaling about 98% of their claims. This announcement was made public through a press release and records filed with the United States Bankruptcy Court of Delaware. The exchange, despite its financial turmoil, has managed to amass $14.5 billion to $16.3 billion by liquidating assets and properties, which include holdings managed by various entities involved in FTX’s recovery operations. The ultimate approval of this settlement hinges on a bankruptcy judge’s ruling and the successful rollout of FTX’s reorganization plan.
Assets Under Management and Recovery Efforts
FTX’s recovery plan involves assets under the jurisdiction of the “Chapter 11 debtors,” Liquidators of FTX Digital Markets Ltd., and FTX Australia, among other private entities partaking in the process. The exchange’s proactive approach in asset liquidation has positioned it to fulfill its debt obligations extensively. With the IRS settlement and the broader restructuring plan in place, FTX aims to restore its financial health and honor its commitments to customers and creditors.
Conclusion
The settlement between FTX and the IRS marks a critical juncture in the exchange’s bankruptcy saga. This agreement not only simplifies the size and priority of the IRS’s claims but also expedites FTX’s path towards distributing funds to its creditors and customers. With significant assets recovered and a clear plan for restructuring, FTX is on a clearer path to resolving its financial woes and ensuring customer satisfaction. Moving forward, the focus will remain on effective implementation of the restructuring plan and fulfilling the exchange’s obligations.
