- FTX has proposed settling the IRS’s $24 billion tax claim with a $200 million payment and $685 million junior subordinated claim.
- If approved by the judge, FTX would pay the IRS $200 million now and $685 million as a junior subordinated claim later.
- The settlement aims to resolve one of the thornier disputes and bigger claims amounting to billions of dollars against the bankrupt cryptocurrency exchange.
Cryptocurrency exchange FTX has proposed settling the IRS’s $24 billion tax claim with a $200 million payment and $685 million junior subordinated claim. This settlement is still pending court approval but would resolve one of the thornier disputes and bigger claims amounting to billions of dollars following the dramatic collapse of what was once a prominent player in the cryptocurrency market.
Background on FTX’s Downfall
FTX filed for Chapter 11 bankruptcy in November 2022 after facing a liquidity crisis triggered by a surge in customer withdrawals and revelations of financial mismanagement. At its peak, FTX was the third-largest cryptocurrency exchange globally, but the fallout exposed a substantial financial black hole leading to its downfall and subsequent legal challenges.
Details of Proposed IRS Settlement
In a June 3 court filing, John J. Ray III, the CEO overseeing FTX’s restructuring, emphasized that the settlement represents a crucial step towards resolving the bankruptcy efficiently. Together, starting in the most challenging financial disaster I have seen, the debtors and their creditors have created enormous value from a situation that easily could have been a near-total loss for customers, Ray stated.
The reorganization plan aims to repay creditors and customers as swiftly as possible, with the expectation that over 90% of assets could be returned by mid-2024. This settlement not only mitigates extensive litigation costs but also provides a clear path forward for FTX’s numerous creditors.
Fallout and Future Outlook
The fallout from FTX’s collapse has been extensive, impacting numerous stakeholders and triggering broader regulatory scrutiny across the cryptocurrency industry. The company’s founder and former CEO Sam Bankman-Fried was found guilty of fraud, conspiracy and money laundering charges in connection with the exchange’s demise.
While challenges remain, the proposed IRS settlement marks an important milestone in resolving FTX’s bankruptcy if approved by the court.
