FTX agrees settlement in $24b IRS tax case

FTX agreed to pay the Internal Revenue Service (IRS) $885 million to settle a $24 billion tax claim the agency levied during bankruptcy proceedings.

According to a filing with the Bankruptcy Court for the District of Delaware, FTX will pay the Internal Revenue Service (IRS) $200 million in priority claims. This amount is due within 60 days of an implemented court-approved creditor repayment plan. 

While FTX attorneys acknowledged the possibility of massive tax obligations, the estate challenged the IRS’s $24 billion case. The troubled crypto company also argued that a multi-billion tax payment could significantly affect individual creditor reimbursements. 

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

FTX inches toward full bankruptcy payouts

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

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

Since the company owes creditors around $12 billion, it could repay most customers up to 118% of their holdings, a rare outcome for any bankruptcy case. 

Meanwhile, some speculate that the biggest winners are administrators and restructuring personnel under bankruptcy veteran and CEO John J. Ray. The embattled firm has approved $500 million in fees to law firms like Sullivan and Cromwell, Paul Hastings, and Quinn Emanuel.