Defunct cryptocurrency exchange, FTX has settled with the Internal Revenue Service (IRS) on its $24 billion tax case according to a recent report by Bloomberg. To resolve a $24 billion tax demand the Internal Revenue Service (IRS) filed during bankruptcy proceedings, the firm consented to pay the agency $885 million.
The settlement paves the path for FTX to disburse sizeable customer recoveries by enabling it to pay a small portion of the sum the IRS demanded. This new development represents a new layer in the months-long drama involving the embattled exchange and the federal tax collector.
IRS to Receive $885 Million From FTX
In a recent filing with the Bankruptcy Court for the District of Delaware, the Samuel Bankman-Fried-founded company FTX, will make two payments to the IRS. First, it will pay $200 million to the tax agency within 60 days of implementing the proposed restructuring plan. Subsequently, it will also pay a $685 million lower-priority claim which is payable as per the availability of the funds on a subordinated basis to customers and other creditors.
The FTX estate previously contested the IRS’s $24 billion case, even though its attorneys admitted the potential for significant tax obligations. The collapsed crypto firm further argued that a multibillion-dollar tax payment might substantially impact the repayment of individual creditors.
This resolution marks a significant shift in the exchange’s bankruptcy procedures since it eliminates a possible source of lengthy and uncertain litigation between the crypto exchange and its largest creditor.
FTX Customers to Receive Full Payments
In a previous report, FTX assured its customers that it would repay their funds in full. On May 7, FTX declared in a press statement that it will reimburse 98% of its clients in cash, or at least 118% of the permitted claims.
The bankrupt cryptocurrency exchange had submitted a fresh plan of reorganization to the Delaware United States Bankruptcy Court. Also, the crypto exchange disclosed that, following the sale of its properties and assets, it has obtained between $14.5 billion and $16.3 billion.
The settlement’s final approval will depend on the bankruptcy judge’s permission and the accomplishment of FTX’s larger restructuring plan. The settlement will become operative upon fulfillment of these requirements.
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