FTX has reached a settlement with its largest creditor, the Internal Revenue Service (IRS). This agreement resolves a significant $24 billion tax dispute that has been looming over the exchange's restructuring process. Initially, the IRS claimed FTX owed over $44 billion in taxes, but this amount has been substantially reduced as part of the settlement.

Implications and Certainty

Under the terms of the settlement, FTX will pay the tax agency $200 million as a priority tax claim within 60 days of the court's approval of the exchange's reorganization plan, as highlighted in a filing presented yesterday (Monday). Additionally, the IRS will collect $685 million, which will be paid after other creditors and customers have been compensated.

The settlement Settlement Settlement in finance refers to the process when a buyer makes payment and receives the agreed-upon services or goods. The term is used on exchanges such as New York Stock Exchange (NYSE) when security changes hands. When the asset is transferred and placed in the new buyer's name, it is considered settled. This process could take a few hours or several days after a trade is made. It depends on the clearance process. In the United States, the settlement date for marketable stocks is usually 2 Settlement in finance refers to the process when a buyer makes payment and receives the agreed-upon services or goods. The term is used on exchanges such as New York Stock Exchange (NYSE) when security changes hands. When the asset is transferred and placed in the new buyer's name, it is considered settled. This process could take a few hours or several days after a trade is made. It depends on the clearance process. In the United States, the settlement date for marketable stocks is usually 2 Read this Term provides much-needed certainty for FTX's creditors and customers regarding the recovery process. By resolving the tax dispute, FTX can now focus on implementing its reorganization plan and distributing assets to stakeholders. The agreement also mitigates the risk of prolonged litigation, which could have further complicated the exchange's bankruptcy proceedings.

While FTX acknowledged its tax obligations, it disagreed with the IRS regarding the amount and specific reasons for the tax liability. The exchange argued that it should not be held responsible for funds misappropriated by its former CEO, Sam Bankman-Fried, and disputed the IRS' calculations for employment taxes related to executive salaries, Cointelegraph reported.

Tax Claims against FTX

Additionally, FTX contended that it has valid deductions and losses that the IRS is unfairly disallowing due to documentation issues. Last year, the US Department of Treasury and the IRS filed claims totaling $44 billion against FTX and its affiliates. This tax claim highlighted the complexities and consequences of the FTX bankruptcy Bankruptcy Bankruptcy or insolvency constitutes a legal term and refers to being unable to repay debts. A business and a person can declare bankruptcy. When a person or company claims bankruptcy, it is described as a voluntary bankruptcy, and when your debtors force you into bankruptcy, it is referred to as involuntary. A voluntary bankruptcy occurs when the debtor or borrower, the party that owes the money files with the courts. Involuntary bankruptcy happens when your credits file a petition with the co Bankruptcy or insolvency constitutes a legal term and refers to being unable to repay debts. A business and a person can declare bankruptcy. When a person or company claims bankruptcy, it is described as a voluntary bankruptcy, and when your debtors force you into bankruptcy, it is referred to as involuntary. A voluntary bankruptcy occurs when the debtor or borrower, the party that owes the money files with the courts. Involuntary bankruptcy happens when your credits file a petition with the co Read this Term, Finance Magnates reported.

These claims targeted multiple FTX entities, including the Bahamas-registered FTX Trading Alameda Research, West Realm Shires, Ledger Holdings, and Blockfolio, among others. The largest tax claims were directed at Alameda Research LLC, with staggering individual claims of $20.4 billion and $7.9 billion and additional claims against Alameda Research Holdings Inc. totaling $9.5 billion.

The $20.4 billion claim related to partnership and payroll taxes, which were marked as a priority over other unsecured creditors. Despite operating outside the US, key FTX executives, including Bankman-Fried and CEO Caroline Ellison, were liable for worldwide income taxes.