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FTX Offers $200 Million Payment to IRS, Aims for Reduction from $24 Billion

Exciting news for the cryptocurrency world! FTX, the bankrupt cryptocurrency exchange, is making progress towards resolving a big tax dispute with the United States Internal Revenue Service (IRS). The proposed deal, which still needs court approval, involves a significant reduction in the $24 billion tax amount initially claimed by the IRS, along with a repayment plan.

FTX and IRS Reach Settlement Agreement

In a June 3 court filing, FTX disclosed its agreement with the IRS. According to the terms of the settlement, FTX will make a priority tax payment of $200 million within 60 days of plan acceptance. The IRS will also receive $685 million as a subordinate claim, following payments to other creditors and customers. This deal covers tax disputes up to October 31, 2022.

This settlement is seen by FTX as a strategic step to minimize litigation risks and provide clarity on the recovery process for creditors and customers.

An FTX spokesperson remarked, “This settlement significantly reduces the chances of prolonged legal battles and establishes a clearer path for all parties involved.”

Nevertheless, despite reaching an agreement, FTX holds firm on several disputed tax liabilities. While recognizing its tax responsibilities, the exchange questions the IRS’s original calculations. FTX argues against being taxed on funds misused by former CEO Sam Bankman-Fried and contests the IRS’s employment tax assessments on executive salaries.

FTX asserts it is entitled to legitimate deductions and losses, which it believes are unfairly denied due to alleged insufficient documentation. However, the IRS has rejected these claims and is prepared to pursue legal action to enforce substantial tax liabilities.

The filing revealed, “The IRS has made it clear that it will utilize all available legal means to ensure tax law compliance.”

Plans for Creditor Repayment

FTX proposed a reorganization plan on May 8, aiming to fully compensate all valid creditor claims. Under this plan, creditors with claims below $50,000 could receive a 118% repayment, covering about 98% of all FTX creditors, based on asset values at the time of FTX’s collapse in November 2022.

The success of the reorganization plan hinges on court approval, making it a crucial step towards resolving one of the most significant financial disputes in recent cryptocurrency history.

An FTX representative expressed, “Our proposed plan demonstrates our commitment to addressing past issues and moving forward with integrity.”

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