FTX has settled with the IRS for $200 million instead of $24 billion, clearing a significant hurdle in its bankruptcy.
As per the documents submitted to the Bankruptcy Court for the District of Delaware, FTX has agreed to settle $200 million worth of priority claims against the Internal Revenue Service (IRS).
This sum is payable 60 days after a creditor repayment plan the court has approved is implemented. The estate contested the IRS’s $24 billion case, even though FTX attorneys admitted the potential for significant tax obligations.
The insolvent cryptocurrency business further contended that a multibillion-dollar tax payment might substantially impact the repayment of individual creditors.Â
The IRS is entitled to $685 million in addition to the $200 million priority payment; nonetheless, the claim is categorized as “lower priority.” Once client payments have been satisfied, the estate can pay this sum.
FTX Inches Toward Full Bankruptcy Payouts
The IRS settlement represents a further step toward the company’s 2022 bankruptcy filing and complete creditor payments. Following the fall of the once-dominant cryptocurrency exchange, which its convicted founder, Sam Bankman-Fried, led, FTX filed for Chapter 11 protection.
After several cryptocurrency collection efforts, discounted Solana (SOL) auctions, and catastrophic share liquidations, the company declared about $16 billion for debtor distribution nearly two years later.
Given that the corporation owes creditors over $12 billion, most clients could receive a repayment of up to 118% of their assets, which is an uncommon result for any bankruptcy case.Â
Some people assume that administrators and restructuring staff working under CEO and bankruptcy veteran John J. Ray will benefit the most in the interim.
The troubled company has given permission for $500 million in fees to be paid to legal practices like Quinn Emanuel, Paul Hastings, and Sullivan and Cromwell.
