FTX Reaches Settlement with IRS on $24 Billion Claim, Prioritizes Customer Repayment

The now-defunct cryptocurrency exchange FTX has agreed to settle the colossal $24 billion tax claim by the U.S. Internal Revenue Service (IRS) for a significantly lower amount, aiding the company to prioritize customer repayments during its ongoing bankruptcy proceedings.

Under the terms of the settlement, the IRS will receive a $200 million priority claim, which must be paid within 60 days after the implementation of FTX’s proposed reorganization plan.

Additionally, the IRS will obtain a $685 million unsecured claim. This subordinate claim will only be paid after satisfying the repayment conditions of customers and other creditors, provided there are sufficient funds.

Details of the settlement were listed in documents submitted to the U.S. Bankruptcy Court in Delaware on June 3.

This settlement marks a critical step in resolving FTX’s bankruptcy issues, eliminating significant potential obstacles. Without this agreement, a prolonged legal dispute with the IRS could have jeopardized the repayment plans for FTX customers.

The company had previously claimed that the IRS’s maintained claim of $24 billion would severely impact customer repayments.

FTX emphasized in court documents that the settlement agreement provides clarity and aids in the quicker resolution of the bankruptcy case, thereby allowing for the swift distribution of funds to creditors and customers.

The company stated:

“This settlement provides much-needed certainty regarding the scale of the IRS claims and enables these Chapter 11 cases to be resolved expeditiously.”

FTX acknowledged that it might bear significant tax liabilities to the IRS but remained committed to repaying customers in full. The company contested the IRS’s $24 billion claim, recognizing the complex legal challenges posed by the agency’s demands.

Sentiment: Neutral