FTX and IRS reach settlement for approximately $885M

FTX debtors will pay the IRS $200M, with an outstanding lower priority claim of $685M

June 4, 2024 12:39 pm

Kiran Jyothi VP/Shutterstock and Adobe modified by Blockworks

The FTX estate and the Internal Revenue Service proposed a settlement that would see the bankrupt exchange’s estate pay the government nearly $1 billion.

The sum, which totals $885 million, is a far cry from the $24 billion originally sought by the IRS.

As part of the proposed plan, the debtors will pay the IRS $200 million within 60 days of confirmation. The other $685 million will be paid “to the extent of funds available in accordance with the settlement.”

Meaning that the claim is on the lower priority list, and other claims will be paid out first.

There’ll be a hearing on the motion held on June 25 before Judge John Dorsey, the judge overseeing the bankruptcy proceedings.

The FTX debtors pushed back against the $24 billion claim by the government tax agency last December, warning that FTX — while operational — “never earned anything anywhere near amounts that could support the IRS claims for $24 billion in taxes.”

And that number was actually cut in half by the agency itself, which originally alleged that it was owed nearly $44 billion in taxes.

The proposed settlement clears yet another hurdle in FTX’s path to winding down its bankruptcy.

Later this month, a hearing will be held to cover the estate’s proposed reorganization plan.

The estate announced in early May that it cobbled together between $14.5 and $16 billion to pay back creditors. But the plan has drawn mixed reviews from critics.

Some creditors are unhappy that their claims will only be paid out according to November 2022 prices. An aspect of the plan that was challenged at the beginning of the year, though Judge Dorsey said that the code is “very clear.”

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