Bankrupt cryptocurrency exchange FTX made a $24 billion agreement with the US Internal Revenue Service (IRS). The settlement amount is a very small fraction of the original demand, paving the way for significant customer recovery.
As part of the settlement, the IRS will receive $200 million in damages in FTX's bankruptcy. This amount will be paid within 60 days from the date of entry into force of the company's proposed restructuring plan. In addition, the IRS will receive a lower priority request of $685 million. That claim is “settleable on a subordinate basis to customers and other creditors” and will be paid “to the extent funds are available,” according to a filing filed Monday in the U.S. Bankruptcy Court for the District of Delaware.
The deal resolves a key hurdle in FTX's bankruptcy proceedings, potentially avoiding lengthy and unpredictable litigation between the struggling company and its largest creditor. FTX had previously argued that if a judge approved the IRS's request, it could block payments to customers.
The settlement “provides much-needed certainty as to the size of IRS Claims and allows these Chapter 11 Cases to move quickly toward resolution, allowing for expedited distribution to the Debtors' other creditors and customers,” FTX said in its filing Monday.
FTX assured its customers that it would refund them in full. While the company has disputed the $24 billion claim, it has acknowledged potential significant tax liability to the IRS and noted that the agency's allegations raise new legal questions.
The deal will go into effect after it is approved by a bankruptcy judge and the broader restructuring plan is implemented.
FTT price responded positively to the development:
*This is not investment advice.