FTX, the bankrupt cryptocurrency exchange, has reached an agreement with the United States Internal Revenue Service (IRS), its main creditor.
This agreement resolves a $24 billion tax dispute that has been a major hurdle in FTX's bankruptcy proceedings, reducing the IRS's initial $44 billion claim against FTX, as revealed in a June 3 court filing.
The agreement, covering all tax liabilities up to October 31, 2022, will take effect once the court approves FTX's reorganization plan.
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The settlement terms specify that the IRS will receive $200 million as a priority tax claim, which FTX must pay within 60 days after the reorganization plan is approved. Additionally, the IRS will collect $685 million as a subordinated claim, which will be settled after the claims of customers and other creditors are paid.
FTX believes this settlement minimizes litigation risks and enhances clarity for creditor and customer recovery.
While FTX acknowledges its tax obligations, it counters the IRS's calculation of the amount owed. FTX claims it should not be taxed on funds misappropriated by former CEO Sam Bankman-Fried and challenges the IRS's employment tax calculations for salaries paid to him and other executives. Additionally, FTX asserts that it has legitimate deductions and losses that the IRS incorrectly rejected due to insufficient documentation.
Despite these claims, the IRS stated:
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.
This settlement represents a significant step for FTX as it works through its bankruptcy process, providing a clearer path to fulfilling its financial obligations.
In other news, in April, a group of investors agreed to drop their class action lawsuit against Sam Bankman-Fried in return for his assistance in legal actions against celebrity promoters of FTX.
