In November 2022, the FTX exchange collapsed due to crimes committed by Sam Bankman-Fried, causing significant turmoil in the cryptocurrency market. However, the situation has recently improved, and FTX has been pursuing various solutions. A Bloomberg report highlights a notable development in this regard.
What Led to FTX’s Recent Legal Victory?
FTX scored a major victory in its ongoing dispute with the Internal Revenue Service (IRS), which had demanded $24 billion from the embattled exchange. According to the report, both parties reached an agreement for a much lower sum, allowing FTX to begin customer recovery payments.
The settlement involves a $200 million payment to the IRS within the first 60 days of FTX’s proposed restructuring. Additionally, the IRS will get a subordinate claim of $685 million, payable only if funds are available after addressing customer and other creditor claims.
How Does This Affect FTX’s Bankruptcy Proceedings?
The agreement removes a significant hurdle in FTX’s bankruptcy process and brings an end to the prolonged lawsuit with its largest creditor. FTX had previously warned that if the IRS’s claim was approved, it could impact its ability to make payments to customers.
Key Takeaways for Stakeholders
This development has several concrete implications for stakeholders:
- Customers are more likely to receive their owed payments.
- The bankruptcy process will proceed more smoothly without the massive IRS claim.
- FTX can focus on restructuring and recovery efforts.
Statement from FTX
In a statement issued on Monday, FTX emphasized that the agreement with the IRS eliminates uncertainties regarding the claimed amount and facilitates a quicker resolution of their Chapter 11 Cases. The company assured that distributions to other creditors and customers could now be made promptly.
FTX reiterated its commitment to fully repaying customers and noted that while the $24 billion claim was contested, there remains a possibility of significant tax liabilities to the IRS, which could present additional challenges.