Crypto Exchange FTX Agrees to Pay $885 Million to IRS to Settle Tax Claims

News | June 12, 2024 By:

On Monday, June 3, 2024, FTX and the Internal Revenue Service (IRS) reached a significant settlement resolving a longstanding $24 billion tax dispute.

Cryptocurrency exchange FTX, which filed for bankruptcy in November 2022, had been embroiled in tax negotiations with the IRS for months. The agency had originally claimed FTX owed over $44 billion in unpaid taxes and drafted various tax claims targeting different entities within the FTX group.

As part of the settlement, FTX agreed to pay the IRS $200 million within the next 60 days, pending court approval of its reorganization plan. An additional $685 million will also be paid to the IRS after other creditors and customers have received compensation.

This provides much-needed certainty for those involved in the bankruptcy proceedings. With the largest tax dispute now resolved, FTX can focus on distributing assets to stakeholders as it works to exit bankruptcy. The agreement also reduces the risk of protracted legal battles that could prolong the process.

While FTX acknowledged its tax obligations, it contested the IRS’ calculations for employment taxes related to executive salaries. The exchange also maintained it should not be on the hook for any funds misappropriated by its disgraced former CEO Sam Bankman-Fried. In addition, FTX argued it was entitled to various deductions and losses that the IRS was unfairly disallowing.

Nonetheless, the settlement brings the total tax claims against FTX affiliates like Alameda Research down to $24 billion from the initial $44 billion figure. This should allow a smoother restructuring process for FTX and provide clearer guidance on how the IRS views taxation around digital currencies, blockchain networks, and the growing cryptocurrency industry.

With one of the largest obstacles now cleared, the future of FTX’s bankruptcy proceedings appears brighter. But major hurdles remain as the company seeks to regain credibility and compensate users affected by its dramatic collapse.

Please contact BlockTribune for access to a copy of this filing.