The settlement removes a significant obstacle in FTX’s bankruptcy proceedings, which avoids potentially lengthy and uncertain legal battles between the failed crypto exchange and its primary creditor.
Collapsed cryptocurrency exchange FTX has reached a significant settlement with the Internal Revenue Service for a $24 billion tax claim.
According to Bloomberg, the $24 billion settlement is just a fraction of what the agency initially said the exchange owed. The settlement clears the part for the firm to pay out customer recoveries.
IRS and FTX Settlement
The IRS noted that the collapsed exchange will pay $200 million within 60 days of the firm’s proposed plans to repay customers going into effect. The agency also stated that it would receive a $685 million lower priority claim, “payable on a subordinated basis to customers and other creditors and to the extent funds are available,” according to a Monday filing in the US Bankruptcy Court for the District of Delaware.
The settlement removes a major obstacle in FTX’s bankruptcy proceedings, which avoids potentially lengthy and uncertain legal battles between the failed crypto exchange and its primary creditor.
According to FTX, if the judge had upheld the claim, customers would not have received payments.
“The settlement provides much-needed certainty as to the magnitude of the IRS Claims and allows these Chapter 11 Cases to move swiftly toward resolution, thereby enabling the prompt distribution to the Debtors’ other creditors and customers,” FTX stated in the Monday filing.
FTX objected to the $24 billion claim but conceded that it may face substantial tax obligations to the IRS. Additionally, the firm acknowledged that the agency’s claims raise unprecedented legal issues.
The settlement will come into effect once a bankruptcy judge grants approval and the comprehensive restructuring plan is implemented.
The primary objective of the restructuring plan is to prioritize and repay customers and creditors, anticipating the return of over 90% of assets by mid-2024.
Sam Bankman-Fried’s Conviction and Transfer
FTX’s collapse had far-reaching consequences, affecting many stakeholders and sparking regulatory scrutiny. The firm’s former CEO, Sam Bankman-Fried (SBF), was convicted of fraud, conspiracy, and money laundering related to the exchange’s downfall.
Meanwhile, the former CEO was moved to a new prison facility where he could be close to his parents.