FTX, the bankrupt cryptocurrency exchange once run by Sam Bankman-Fried, has settled with the Internal Revenue Service (IRS) regarding a $24 billion claim, according to a recent report by Bloomberg Law.

Settlement Details

Under the settlement terms, FTX will pay the IRS $200 million within 60 days of implementing the proposed restructuring plan.

Additionally, the IRS will receive a lower priority claim of $685 million. Depending on the availability of funds, this will be paid on a subordinated basis to customers and other creditors.

These details were outlined in a filing made by FTX in the US Bankruptcy Court for the District of Delaware.

Financial Clarity

This settlement is a significant development in the exchange's bankruptcy proceedings. 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 reported by Bitcoinist, FTX has assured its customers that it will repay them in full. In press releases on May 7 and May 77th, FTX announced that it will pay back 98% of its customers in cash, at a minimum of 118% of the allowed claims.

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.

Court Approval

Final approval of the settlement will depend on a bankruptcy judge's endorsement 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 a significant step forward in the exchange's bankruptcy proceedings.

Market Impact

When 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.

FTX, which once ranked as the third-largest cryptocurrency exchange globally, filed for Chapter 11 bankruptcy in November 2022 following a dramatic collapse triggered by a liquidity crisis and revelations of financial mismanagement.

The IRS had initially filed claims against FTX exceeding $44 billion, later adjusted to $24 billion.

Looking Ahead

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, expecting over 90% of assets to be returned by mid-2024. This settlement mitigates extensive litigation costs and provides a clear path forward for FTX's numerous creditors.