The bankrupt cryptocurrency exchange FTX has reached a tentative agreement with the US Internal Revenue Service (IRS) to settle a major tax dispute. The deal is subject to a court approval, but it marks a significant step forward for FTX’s bankruptcy process.
According to a recent filing, FTX and the IRS agreed to settle a $24 billion tax claim, which was initially valued at over $44 billion. The settlement will see the IRS receive $200 million in priority tax payments within 60 days of the court’s approval. The tax authority will also collect an additional $685 million in subordinated claims, which will be paid after customers and other creditors.
The deal covers all tax claims up to October 31, 2022, and is seen as a major relief for FTX. The exchange argues that the settlement reduces the risk of litigation and increases certainty for creditors and customers.
FTX doesn’t deny owing taxes, but disputes the amount and reasons for the tax liability. The exchange claims that it shouldn’t be taxed on funds misappropriated by its former CEO, Sam Bankman-Fried, and argues that employment taxes related to salaries paid to Bankman-Fried and other executives were wrongly calculated. Additionally, FTX claims that it has valid deductions and losses that were wrongly disallowed due to lack of proper documentation.
The IRS disagreed with FTX’s claims and was prepared to take the matter to court. However, the tentative agreement marks a significant step forward for FTX’s bankruptcy process.
Summary Review: In a major development, FTX has reached a tentative agreement with the US Internal Revenue Service (IRS) to settle a significant tax dispute. The deal, which is subject to court approval, will see the IRS receive $200 million in priority tax payments and an additional $685 million in subordinated claims. The settlement marks a major step forward for FTX’s bankruptcy process, reducing the risk of litigation and increasing certainty for creditors and customers. The agreement comes after a protracted dispute over the amount and reasons for the tax liability, with FTX disputing the IRS’s claims and arguing that it should not be taxed on funds misappropriated by its former CEO. The outcome of the settlement is expected to have significant implications for FTX’s future and its stakeholders, and its approval is likely to be closely watched by the cryptocurrency and financial communities.
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