FTX agrees settlement in $24b IRS tax case

FTX agreed to pay $885 million to the Internal Revenue Service (IRS) to satisfy $24 billion in tax demands collected by the agency during bankruptcy proceedings.

According to the application filed with the Bankruptcy Court for the District of Delaware, FTX will pay $200 million to the Internal Revenue Service (IRS) for priority claims. This amount will be paid within 60 days from the implementation of the court-approved creditor repayment plan.

While FTX lawyers acknowledged the possibility of large tax liabilities, the entity appealed the IRS’s $24 billion lawsuit. The troubled crypto company also argued that billions of dollars in taxes could significantly impact individual creditor refunds.

In addition to the $200 million priority payment, the IRS owes $685 million, but the request is classified as “low priority.” The estate can pay this amount when funds are available after meeting customer payments.

FTX moves towards full bankruptcy settlement

The IRS settlement takes another step toward full creditor payments following the firm’s bankruptcy filing in 2022. FTX sought Chapter 11 protection after the once-leading crypto exchange collapsed under the leadership of its convicted founder Sam Bankman-Fried.

Nearly two years later, after Anthropic share liquidations, discounted Solana (SOL) auctions, and numerous crypto rescue missions, the firm announced almost $16 billion in debtor distribution.

Because the company owes about $12 billion to creditors, it could repay most customers up to 118% of its assets; This is a rare outcome in any bankruptcy case.

Meanwhile, some think the biggest winners are executives and restructuring staff under bankruptcy veteran and CEO John J. Ray. The embattled firm approved $500 million in fees to law firms including Sullivan and Cromwell, Paul Hastings and Quinn Emanuel.