The taxman will still have to wait to receive the money from the failed crypto exchange
FTX has reached an agreement with the US Internal Revenue Service (IRS) to settle the debt with its largest creditor. In the filing dated June 3, the bankrupt cryptocurrency exchange agreed to settle the $24-billion IRS claim, which was initially more than $44 billion, for a much lesser amount. The court must still approve the settlement as part of FTX’s reorganization plan.
The IRS will receive $200 million, which will be paid within 60 days of approval. The agency will also receive $685 million as a subordinated claim, which FTX will pay after settling with other creditors and former customers.
The agreement covers all IRS tax claims up to Oct. 31, 2022. According to FTX, it lowers the risk of litigation and increases confidence that creditors and customers will recover funds. “The outcome of these proceedings would be uncertain given certain novel and complex issues of tax law raised by the IRS Claims.”
According to the filing, FTX doesn’t dispute that it owes taxes but disagrees with specific reasons for the liability and the amount owed. FTX doesn’t feel it should be taxed on funds misused by former CEO Sam Bankman-Fried and disputes the IRS’ claim for employment taxes related to executive salaries.
However, the IRS has challenged those claims and said it is prepared to battle FTX in court for any outstanding tax payment. It explained, “The IRS does not agree with the Debtors’ arguments and has informed the Debtors that absent a settlement it would pursue these and other theories to impose significant tax liability.”
FTX’s new proposal is to fully reimburse all creditors on May 8, with additional compensation added. Those creditors with claims under $50,000 will receive a 118% recovery, which FTX said covers “98% of the creditors of FTX by number.”
Emma Rodriguez is the Proofreader at the Big Blind, with seven years of experience and five years in online gambling. She plays a crucial role in maintaining content quality by ensuring error-free, reader-friendly information about the gambling industry.
