FTX, the bankrupt cryptocurrency exchange company, has recently received preliminary approval for a $200 million settlement with the United States Internal Revenue Service (IRS) as part of the ongoing bankruptcy proceedings. This agreement comes in the context of the IRS’s claims against FTX, which started at over $44 billion in taxes owed but have been negotiated down to $24 billion.
The proposed deal, which is still to be approved by the court, states that the IRS will get $200 million as a priority tax claim and another $685 million as a subordinated claim. This resolution pertains to all the tax claims up to October 31, 2022, which will give clarity and financial stability to FTX’s creditors and customers.
FTX has accepted its tax liability but has questioned the details of its liability, especially regarding the funds that were allegedly embezzled by the former CEO, Sam Bankman-Fried. The exchange contends that these funds should not be subjected to tax. Furthermore, FTX has a disagreement with the IRS on employment taxes concerning executive salaries, pointing out valid deductions and losses that it believes were disallowed due to documentation problems.
FTX Estate to Auction Locked Solana Tokens Following Massive SaleIn response, the IRS had already been planning to sue FTX for large tax payments but has agreed to the settlement presented. The settlement is seen as a strategic decision made by FTX to reduce the legal risks and concentrate on the repayment plan for creditors. The May 8 proposal by the exchange intends to return all funds with a focus on the creditors with their claims below $50,000 with an expectation of receiving 118% of their claims as of the time of FTX’s failure in November 2022.
The result of this settlement will be crucial in defining the financial future of FTX and the company’s capacity to come out of the bankruptcy proceedings.
