decrypt.co
Bankrupt cryptocurrency exchange FTX might be able to settle a $24 million claim from the U.S. Internal Revenue Service (IRS) for $200 million. This settlement is still pending court approval, but would resolve one of the thornier disputes and bigger claims amounting to billions of dollars.
FTX, once a prominent player in the cryptocurrency market, filed for Chapter 11 bankruptcy in November 2022 following a dramatic collapse. The company faced a liquidity crisis triggered by a surge in customer withdrawals and revelations of financial mismanagement. At its peak, FTX was the third-largest cryptocurrency exchange globally, but the fallout exposed a substantial financial black hole, leading to its downfall and subsequent legal challenges.
The IRS had initially filed claims against FTX exceeding $44 billion, later adjusted to $24 billion. The proposed settlement significantly reduces these claims, with the IRS set to receive a $200 million priority claim and a $685 million junior subordinated claim. These claims will be addressed as part of FTX's proposed reorganization plan, which is scheduled for a court hearing on June 25.
In a June 3 court filing, John J. Ray III, the CEO overseeing FTX's restructuring, emphasized that the settlement represents a crucial step towards resolving the bankruptcy efficiently. “Together, starting in the most challenging financial disaster I have seen, the debtors and their creditors have created enormous value from a situation that easily could have been a near-total loss for customers,” Ray stated.
The reorganization plan aims to repay creditors and customers as swiftly as possible, with the expectation that over 90% of assets could be returned by mid-2024. This settlement not only mitigates extensive litigation costs but also provides a clear path forward for FTX's numerous creditors.
The fallout from FTX's collapse has been extensive, impacting numerous stakeholders and triggering broader regulatory scrutiny across the cryptocurrency industry. The company's founder and former CEO, Sam Bankman-Fried, was found guilty of fraud, conspiracy, and money laundering charges in connection with the exchange's demise.
Editor’s note: This article was written with the assistance of AI. Edited and fact-checked by Stacy Elliott.