According to a recent report by Bloomberg Law, the bankrupt crypto exchange once run by Sam Bankman-Fried, FTX, has reached a settlement with the Internal Revenue Service (IRS) regarding a $24 billion claim.
The settlement allows FTX to pay a fraction of the amount claimed by the IRS, clearing the way for the exchange to distribute significant customer recoveries.
FTX’s $885 Million Settlement
Under the settlement terms, the firm will pay the IRS $200 million within 60 days of implementing the proposed restructuring plan.
In addition, the IRS will receive a lower priority claim of $685 million, which will be paid on a subordinated basis to customers and other creditors, depending on the availability of funds. These details were outlined in a filing made by FTX in the US Bankruptcy Court for the District of Delaware.
This settlement is a significant development in the exchange’s bankruptcy proceedings, as it resolves a potential source of prolonged and uncertain litigation between the crypto exchange and its largest creditor.
FTX had previously argued that if a judge upheld the IRS claim, it could have hindered the payment of customer funds.
The settlement brings much-needed clarity regarding the size of the IRS claims and paves the way for a swift resolution of the Chapter 11 bankruptcy cases. As stated in the Monday filing, this will enable FTX to distribute funds to its other creditors and customers promptly.
Customers To Receive 98% Of Claims In Cash
As reported by Bitcoinist, FTX has assured its customers that it will repay them in full. In a press release on the 7th of May, FTX announced that it will pay back 98% of its customers at a minimum of 118% of the allowed claims in cash.
The insolvent crypto exchange had filed a new reorganization strategy with the United States Bankruptcy Court of Delaware.
The crypto exchange has also revealed that it has secured between $14.5 billion and $16.3 billion after selling assets and properties owned by the company.
This specifically includes assets under the control of the “Chapter 11 debtors,” the Joint Official Liquidators of FTX Digital Markets Ltd., and FTX Australia, as well as various private parties participating in the recovery and repayment process.
Final approval of the settlement will be subject to the endorsement of a bankruptcy judge and the successful implementation of FTX’s broader restructuring plan. Once these conditions are met, the settlement will take effect.
This resolution between FTX and the IRS marks an important step forward in the exchange’s bankruptcy proceedings. With the settlement in place, FTX can focus on restructuring efforts and work towards satisfying its obligations to customers and creditors.
At the time of writing, the exchange’s native token FTT is trading at $1.60, following the general market uptrend, which has seen a 3% increase in the last 24 hours alone.
Featured image from Shutterstock, chart from TradingView.com