According to Cointelegraph: Bankrupt crypto exchange, FTX, has laid a significant milestone in its bankruptcy process, securing tentative approval for a crucial $200 million settlement with the United States Internal Revenue Service (IRS). The settlement plays a pivotal role in reducing the IRS's initial claim of FTX owing over $44 billion in taxes down to $24 billion.
The agreement, subject to court approval, allows the IRS to collect $200 million as a priority tax claim and an additional $685 million as a subordinated claim. This sets a clear roadmap for the resolution of all tax claims up until October 31, 2022. With the settlement, FTX aims to curtail litigation risks, bolster financial certainty for creditors and customers, and navigate the complex tax law labyrinth.
While FTX acknowledges its tax obligations, the bone of contention lies in the liability's specifics. The crypto exchange proposed that funds misappropriated by former CEO, Sam Bankman-Fried, should not be taxed. Disagreements also arose via IRS calculations for employment taxes linked to salaries paid to Bankman-Fried and other executives.
FTX argues valid deductions and losses are disallowed due to insufficient documentation. The IRS, ready to clash in court for a significant tax payment, did not agree with the assertions. However, the proposed settlement suppresses these tax liability disputes, offering a fresh lease of life to FTX's pending bankruptcy proceedings.
In a May 8 repayment plan proposal, FTX expressed an ambition to reimburse all claims plus additional compensation fully. This repayment plan prioritizes creditors with claims below $50,000, projected to be "98% of all FTX creditors", promising a 118% recovery of their claims, with repayments based on asset value at the moment of FTX's collapse in November 2022.