Just In: FTX Proposes $200M Payment to IRS, Seeks Reduction from $24B
The bankrupt cryptocurrency exchange FTX has tentatively agreed with the United States Internal Revenue Service (IRS) to resolve a $24 billion tax dispute. The deal, which still requires court approval, proposes a substantial cut in the amount initially claimed by the tax authorities and outlines a repayment plan.
FTX Agrees to $885M IRS Settlement Deal
The agreement between FTX and the IRS was disclosed in a June 3 court filing. Under the terms of the proposed settlement, FTX would pay $200 million as a priority tax claim within 60 days following the plan’s acceptance. Additionally, the IRS would receive $685 million as a subordinated claim, prioritized after other creditors and customers are paid. This arrangement addresses tax disputes up until October 31, 2022.
FTX sees this agreement as a strategic move to reduce litigation risks and enhance certainty concerning the recovery processes for creditors and customers.
“This settlement significantly lowers the possibility of extended litigation and helps establish a clearer recovery pathway for all parties involved,” an FTX spokesperson commented.
Despite the agreement, FTX has taken a stand on several points of contention regarding its tax liabilities. The exchange acknowledges its tax obligations but disputes the IRS’s original calculations. FTX argues it should not be taxed on funds misappropriated by former CEO Sam Bankman-Fried. It contests the IRS’s employment tax calculations on salaries paid to Bankman-Fried and other top executives.
FTX also believes it has legitimate deductions and losses, which are being unfairly denied due to alleged inadequate documentation. However, the IRS has rejected these arguments and indicated readiness to pursue litigation to enforce substantial tax liabilities.
“The IRS has clearly stated it will continue to seek all available legal avenues to ensure compliance with the tax laws,” the filing revealed.
Reorganization Plan Offers 118% Creditor Repayment
On May 8, FTX proposed a reorganization plan to compensate all valid creditor claims fully. Under this plan, creditors with claims of less than $50,000 are eligible for 118% repayment. This would cover approximately 98% of all FTX creditors by number, based on asset values at the time of FTX’s collapse in November 2022.
The reorganization plan’s success hinges on court approval. If accepted, it will mark a significant milestone in resolving one of the largest financial disputes in recent cryptocurrency history.
“The proposed plan demonstrates our commitment to rectifying the issues from our past management and moving forward with integrity,” stated an FTX representative.
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